U.S. trucking sector remains ‘sluggish’

by The City Wire staff ([email protected]) 69 views 

In a word, the U.S. freight environment is “sluggish” — not a good word for a sector considered a leading economic indicator.

The American Trucking Associations’ reported Tuesday (May 22) that its seasonally adjusted Truck Tonnage Index fell 1.1% in April after increasing 0.6% in March. The latest drop put the index at 118.7 (2000=100), down from March’s level of 120.

Year-to-date, compared with the same period last year, tonnage was up 3.8%.

“While April’s decrease was a little disappointing, the March gain turned out to be stronger than originally thought,” ATA Chief Economist Bob Costello said in a statement. “The ups and downs so far this year are similar to other economic indicators.”

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 116.9 in April, which was 5.5% below the previous month.

MODERATE PACE
Costello continues to warn that the national trucking sector will not see the 5.8% annual rate of growth experienced in 2010 and 2011.

“While just one month, the April’s decrease also matches with an economy that is likely to grow slightly slower in the second quarter than in the first quarter,” Costello said. “I continue to expect tonnage to moderate from the pace over the last two years. Annualized growth in the 3% to 3.9% seems more likely.”

Officials at Fort Smith-based Arkansas Best Corp. would settle for a moderate increase. Their largest subsidiary, ABF Freight System has been unable to increase tonnage and revenue during the early months of 2012. The company posted a $12.787 million loss during the first quarter of 2011. First quarter tonnage for ABF — one of the nation’s largest less-than-truckload carriers — was down 10.6% compared to the 2011 period.

“ABF's daily tonnage levels were impacted by pricing actions taken throughout 2011, and an economic environment that was sluggish and inconsistent, despite some improvement throughout the first quarter,” the company reported in the first-quarter earnings statement.

In the first six weeks of the second quarter, per day tonnage for ABF is down about 8%, with billed revenue down about 2%, the company noted in a May 17 federal filing.

‘SLUGGISH SHIPMENT GROWTH’
St. Louis-based Cass Information Systems also views the trucking sector as an economic barometer, and produces monthly the Cass Freight Index.

“The 2.1 percent month‐to‐month rise in freight volumes followed a 2.5 percent jump last month — sluggish shipment growth compared to 2011 (2.6 and 6.9 percent respectively),” noted Cass’ March report. “Year over year, March shipments are 1.3 percent lower than a year ago. Record high inventories, combined with low demand, are likely the culprits for the unseasonably low growth.”

Cass uses data from $20 billion in annual freight transactions processed by its information processing division to create the Index. The company processes transactions for about 350 large shippers who represent a broad sampling of industries including consumer packaged goods, food, automotive, chemical, OEM, retail and heavy equipment.

The Cass report also noted that trucking companies continue to have a hard time finding drivers.

“In fact, many have equipment parked because they have been unable to find drivers. The driver shortage continues to become a more serious problem as the economy gains strength; mid‐size trucking firms have been shifting to intermodal as a way to deal with the shortage. They are also investing in more trailers instead of new complete rigs.”

HOUSING REBOUND EFFECT?
A Bloomberg News report suggests that a rise in housing starts could be a boon to the trucking sector — in particular, for truckload operators like Van Buren-based USA Truck.

Housing starts rose 2.6% to a 717,000 annual rate in April, beating the 685,000 median estimate of 80 economists surveyed by Bloomberg News. Construction has improved 50% from a low of 478,000 reached in April 2009, during the 18-month recession that ended two months later, based on data from the Commerce Department.

“All of the freight required to build a new home has a very positive impact on trucking activity,” said Todd Fowler, an analyst in Cleveland at KeyBanc Capital Markets Inc.

As a rule of thumb, each new residence requires between five and eight truckloads to transport supplies such as lumber, roofing materials and interior furnishings, he said.

Arkansas Best Corp. is awaiting a housing sector comeback, President and CEO Judy McReynolds said at a March 14 conference in New York.

“We are looking forward to the time whenever housing even comes back to something close to normal,” McReynolds said. “It is a sizable factor.”