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The only thing growing much in the U.S. consumer economy right now appears to be frustration. Sluggish consumer spending and lagging inventory investment were big factors in the weak 0.7% growth in U.S. gross domestic product in the first quarter, the WSJ’s Josh Mitchell reports, a puzzling result against a backdrop of growing consumer confidence and solid import figures for U.S. seaports. Consumer spending grew at just a 0.3% annual rate, the weakest since the fourth quarter of 2009. Inventories subtracted nearly a full percentage point from GDP as companies whittled down stockpiles rather than placing new orders. That could reverse if consumers start buying again, and many analysts expect a second-quarter rebound. Still, concerns are mounting over big-ticket items. Car sales are slipping and dealers are sitting on big inventories at lots, and auto makers may start paring back production just as consumer-goods companies and other retailers are trying to work down their own inventories.
Digital sales trends are convincing automobile dealers to get out of real estate. Property has long been one of the most valuable assets in dealer portfolios, with dealers spreading their inventory across valuable space. But the WSJ’s Adrienne Roberts reports that some chains are paring property holdings and shrinking the inventory they keep by the showroom as car buyers increasingly use online tools to shape shopping decisions. It’s the car dealers’ version of the push toward pared-down storefronts some retailers are rolling out, and it carries big stakes. AutoNation Inc. is selling some of its $3 billion in real-estate holdings to pay for a push into the used-car business. Another dealer says it is using a hub-and-spoke model, displaying only limited inventory at various locations and then delivering the cars when a final sale is made. That makes the logistics more complicated, but they’re betting the savings on real estate and inventory balances the ledger.
One online retailing upstart will try a new approach toward managing the balance between web sales and the brick-and-mortar stores. Sneaker seller Greats Brand Inc. plans to open 10 store locations over the next two years, the WSJ’s Khadeeja Safdar reports, but the company is taking only short-term leases ranging from three months to a year. It’s a variation on the move by some e-commerce specialists, including Amazon.com Inc., to open physical storefronts that they believe can help promote brands and draw in new customers. Many online brands including Everlane, Casper and Warby Parker are treading carefully into physical retail, opening temporary stores to experiment with new concepts. Shoe-seller Greats says its stores are such a test, and as the company and retail landlords get more used to the strategy they may find a new structure for the retail landscape in a digital world.
ECONOMY & TRADE
The Trump administration is taking aim at a bulwark of international trade in its drive to redraw global economic relationships. The administration is launching a “performance review” of the World Trade Organization, the WSJ’s Jacob M. Schlesinger reports, with an eye toward attacking what officials call “structural problems” at the global body. The action is the latest in a series of steps advancing President Donald Trump’s “America First” trade policy. Mr, Trump has strongly considered, but set aside, withdrawing from the North American Free Trade Agreement, and now wants to renegotiate an agreement with South Korea. Digging into the WTO, which Mr. Trump has called “one of our disasters,” may have a more far-reaching impact, whether the administration pulls out of the body or exacts changes in its rules. Among the White House problems with the WTO: an institutional bias toward exporters rather than toward people being hurt by imports.
‘We can store cars in old warehouses about two to five miles away. It’s much more cost effective.’
Number of the Day
Decline in U.S. consumer spending on durable goods, such as cars and large home appliances, in the first quarter.
IN OTHER NEWS
Growth in factory activity in China slowed in April to a six-month low. (WSJ)
A measure of U.S. consumer sentiment remained high in April. (WSJ)
Boeing Co. is asking U.S. trade officials to investigate whether Bombardier Inc. is selling its new CSeries jet for less than it cost to manufacture. (WSJ)
Rising fuel and labor costs are starting to cut into airline earnings. (WSJ)
SoftBank Group Corp. is plowing more than $1.5 billion into fast-growing Indian mobile-payment company Paytm. (WSJ)
Starbucks Corp. will invest more in digital-ordering technology to boost its slow sales growth. (WSJ)
The world’s biggest oil companies are seeing a strong rebound in profits this year. (WSJ)
Copper prices are rising sharply on the threat of a labor strike at a mine in Indonesia. (WSJ)
Unionized dock workers at West Coast ports agreed to vote on a proposed three-year extension of their labor contract. (Los Angeles Times)
Maersk Line set a $4.02 billion price for its acquisition of Germany’s Hamburg Süd. (Reuters)
Container volumes at DP World seaport terminals rose 5.7% in the first quarter. (Container Management)
German industrial group Thyssenkrupp plans to open a 3D printing center this year to manufacture products for its customers. (Fortune)
Revenue at Deutsche Lufthansa AG’s logistics division soared 18.5% in the first quarter. (The Loadstar)
Cross-border e-commerce pushed first-quarter international express revenue up 20% at Middle East logistics provider Aramex. (The National)
European freight carrier Cargolux reported a $5.5 million net profit for 2016 on a 10% gain in volume. (Lloyd’s Loading List)
Officials at Oregon’s Port of Portland want to improve rail connections to nearby ports to help regional shippers reach international markets. (Capital Press)
Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin, @jensmithWSJ and @EEPhillips_WSJ and follow the WSJ Logistics Report on Twitter at @WSJLogistics.
Write to Paul Page at firstname.lastname@example.org