No clear improvement in nationwide trucking index

The American Trucking Associations’ advance seasonally adjusted index fell 2.4% in June, which presents a mixed picture for the trucking sector when compared to the May index increase of 3.2%.
 
Compared with June 2008, tonnage fell 13.6%, which surpassed May’s 11% year-over-year drop. June’s contraction was the largest year-over-year decrease of the current cycle, exceeding the 13.2% drop in April.   
 
“While I am hopeful that the worst is behind us, I just don’t see anything on the economic horizon that suggests freight tonnage is about to rise significantly or consistently,” ATA Chief Economist Bob Costello said in a statement. “The consumer is still facing too many headwinds, including employment losses, tight credit, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.”

Unfortunately, the picture may be more bleak than the numbers suggest, according to Costello. Unlike past recessionary cycles in which improved truck tonnage preceded economic recovery, this recovery may see no such trend because inventories remain high relative to sales.

“As a result, this is likely to be the first time in memory that truck tonnage doesn’t lead the macro economy out of a recession. Today, many new product orders can be fulfilled with current inventories, not new production, thus suppressing truck tonnage,” Costello explained.

Fort Smith-based Arkansas Best Corp., which posted a second quarter net income loss of $15.4 million, reports that the nationwide depression in the freight industry began in October 2006. The number of ABF shipments in the first six months of 2009 is down 16.2% compared to the same period in 2008, and the company’s tonnage shipped is down 17.3% in the first half of 2009 compared to the first half of 2008.

Van Buren-based USA Truck is not immune from the nationwide freight depression. For the first six months of 2009, the long-haul trucking company posted a loss of $3.02 million. Total revenue for the period is $185.8 million, down 32% from the revenue of the first six months of 2008.

“Freight conditions have steadily deteriorated since the current freight depression began in the second half of 2006,” Clifton Beckham, USA Truck president and CEO, said in the quarterly earnings statement released July 16. “Freight availability remains at historically low levels and pricing competition has been fierce as excess tractor capacity, buoyed by lenient lenders and lower fuel prices, continues to exist in the marketplace.”

Trucking serves as a barometer of the U.S. economy, representing nearly 69% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, according to the ATA.