Freight reports suggest slower economic growth

Two measures considered bellwethers for the U.S. economy are not optimistic about improving conditions for the remainder of 2012. The lack of optimism results from a combination of politics, manufacturing slowdown and declining consumer sentiment.

On Tuesday (Sept. 25) the American Trucking Associations’ For-Hire Truck Tonnage Index fell 0.9% in August after a slight 0.4% increase in July — revised upward from an original flat estimate. Year-to-date, compared with the same period last year, tonnage was up 3.7%.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 126.8 in August, which was 5.7% above the previous month.

“While there has been acceleration in housing during the last few months, truck tonnage is being weighed down by a flattening in manufacturing output and an unintentional increase in inventories throughout the supply chain,” ATA Chief Economist Bob Costello said in the ATA statement. “While choppy, tonnage has essentially been flat this year with August being the second lowest month of the year.”

Costello said continued manufacturing decline and retailers working through excess inventories will keep tonnage low. He predicts tonnage during 2012 will increase less than 3.5% compared to 2011.

“Expect tough year-over-year comparisons to continue through the rest of the year as tonnage grew nicely during the last five months of 2011,” Costello said.

Following is the track of Index changes during the first seven months of 2012.
August: down 0.9%
July: up 0.4%
June: up 1.1%
May:  down 0.7%
April: down 1.1%
March: up 0.6%
February: up 0.5%
January: down 4.6%

According to the ATA, trucking serves as a barometer of the U.S. economy, representing almost 70% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or more than 80%, of total revenue earned by all transport modes.

CASS INDEX
St. Louis-based Cass Information Systems recently reported through its Cass Freight Index that North American freight volumes were down 1.1% in August, a steeper decline than the 0.7% dip in July.

“Freight volumes grew 9.9 percent during the first half of the year, but after two months of consecutive contraction, the annual growth has fallen to 8.0 percent,” Cass noted in the report.

The Cass Freight Index included the following notes.
• “The Consumer Reports Index measuring consumer financial health showed that back‐to‐school sales have not met retailers’ expectations. Their Index fell from 9.9 to 9.4 in August and is well below last year’s 12.0 percent. In addition, retailers are reporting more and deeper discounting in an effort to move goods off the shelves. All of this points to a continued drop in freight volume for the remainder of the year.”

• “Building inventories, declining new orders and backlogs, and falling consumer and business confidence in short‐term economic growth are all pointing to a flat to declining freight market in the coming months. Uncertainty regarding taxes, as well as other issues that hinge on this year’s election, has bred a sense of uneasiness and unwillingness to move forward.”

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.