Service sectors' sales slip

//February 14, 2008

Service sectors' sales slip

//February 14, 2008

The slowing economy has most people keenly watching the markets.

Executives and analysts in the transportation and warehousing industries are keeping tabs, too, because if it needs to be built, sold and purchased, then it needs to be moved and stored. So if consumer confidence is shrinking and buying ceases at a quickening rate, logistics firms also will feel the pinch on their businesses.

Officials from trucking, warehousing and other logistics firms in Central Pennsylvania said they are not worried yet. The year started off solid and even if it turns sour later, the companies are on firm footing, executives said.

Most service sectors reported constricted business in January, including transportation and warehousing, according to a Feb. 5 report from the Institute for Supply

Management. Analysts at the Arizona-based institute are vigilant. The January slowdown was the first time in nearly five years that companies reported less business compared with the previous month.

"(The economy has) been slowing pretty consistently, but the contraction in January was surprising," said Tony S. Nieves, chairman of the institute's non-manufacturing-business survey committee and a senior vice president of supply management for Los Angeles-based Hilton Hotels Corp.

New orders, export orders and imports in transportation and warehousing decreased in January, according to the institute's report. The number of companies surveyed in each industry is proportional to that industry's share of gross domestic product, Nieves said. Companies are taking less business but paying more for the services and products they need.

Nieves said he's not worried about this point.

"One month does not make up the whole picture," he said.

That's the way ProLogis looks at it, too, said George Hasenecz, the Pennsylvania market officer for the warehouse developer and management firm based in Denver. ProLogis operates several large warehouse facilities in Central Pennsylvania.

In its annual report filed Feb. 7, ProLogis outlined a plan for 2008 that will put 80-85 percent of its new development outside the U.S. It also noted that although the top American markets were stable, facility vacancies in the top 30 markets edged up slightly in the fourth quarter of 2007. However, ProLogis has leased 96 percent of the area at its North American facilities.

ProLogis has done well in Central Pennsylvania because the area is part of a larger region along the Interstate 81/Interstate 78 corridor, Hasenecz said. The region is among ProLogis' top 10 markets, he said.

"The last few years, the Pennsylvania market has performed very well," he said. "The transportation sector in PA is better than New Jersey right now because the I-95 corridor is too congested."

While ProLogis' strategy includes expansion outside the U.S. to weather the economic doldrums, The company is not fretting about business, Hasenecz said. The markets are still good, and the company is preparing for deals, with 7 million square feet of new warehouse space pending.

"People are going to still buy books, food, clothes and food for their pets. So we're not seeing that pull back," Hasenecz said. "The market in Pennsylvania has been active, and we expect it to continue."

One of the largest pains to the trucking and logistics industries is costs, Nieves said. Fuel, energy and oil prices continue to set companies back. Part of the problem, he said, is that companies can't pass on the price increases fast enough to recoup the costs.

Everyone has concerns, said Samuel

Polakoff, president of York County-based transportation and freight broker TBB Global Logistics Inc.

"I've been asked this question three times today," he said. "Everyone wants to talk about the economy and the logistics industry."

When the economy is down, the logistics industry will drag, too, he said. Fuel costs are beating up the trucking and freight companies. The costs also are hurting clients. Transportation is one of the top five expenses for most companies, he said.

Lebanon County-based J.P. Donmoyer Inc., a trucking firm that hauls crushed stone and other bulky products, has not seen the same slowdown that other firms have, said Frank Costanzo, vice president and general manager.

"We like to think the team we have put together here is very proactive with transportation forecasts and other initiatives," he said.

J.P. Donmoyer had record sales in December and January, which executives weren't expecting. Usually, those are two of the slowest months out of the year, Costanzo said.

"This year, since we started off so well, we're confident we can carry that momentum forward," he said.

Everyone will have to wait to see how the next several months play out, Nieves said.

"You have to look at it as a whole picture," Nieves said.