Freight reports present mixed economic outlook

Optimism was the theme of an American Trucking Associations’ economic report, but a broader index that measures shipments and freight expenditures delivered a sour note on future economic conditions.

The American Trucking Associations’ Truck Tonnage Index fell 2.8% in October compared to September, but was up 8% compared to October 2012. Year-to-date, the tonnage index is up 5.5% compared to the 2012 period. Also, October was the first decrease in the monthly index since July.

“From May through September, the index surged 3.5%, including only one monthly decrease over that period,” ATA Chief Economist Bob Costello said in the tonnage report. “It isn’t surprising for volumes to fall back some after such a good run.”

Costello said the “robust” year-over-year gains suggest the economy may be stronger than some believe.
 
“Specifically, the heavy freight sectors, like tank truck, have been helping tonnage this year. But in the third quarter, generic dry van truckload freight saw the best quarterly gains since 2010. I view this positively for the economy. I view it positively for trucking. Now, we have to see if it continues,” Costello said.

Trucking serves as a barometer of the U.S. economy, representing 67% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, according to the ATA. Trucks hauled 9.2 billion tons of freight in 2011. Motor carriers collected $603.9 billion, or 80.9% of total revenue earned by all transport modes.

The Cass Freight Index reported a 2% decline in the shipment index and a 0.8% gain in the expenditure side of the index.

St. Louis-based Cass uses data from $22 billion in annual freight transactions processed by its information processing division to create the Index. The data comes from a Cass client base of 350 large shippers.

‘COOL DOWN’ SIGNS
Rosalyn Wilson, a supply chain expert and senior business analyst with Vienna, Va.-based Delcan Corp., who provides economic analysis for the Cass Freight Index, said the 16-day federal shutdown in October is partially to blame for the decline in shipments, “but prior to the shutdown the economy was already exhibiting signs of a cool down.”

“The 3.5 percent decline in freight volumes followed two months of strong growth, but is reflective of the weakening state of the overall economy. Shipment volume has already been below corresponding 2012 volumes in six months of this year, and October contributed the seventh month, coming in 2.0 percent below a year ago,” Wilson noted.

The eventual federal budget agreement only “kicked the can down the road,” Wilson said, which is not likely to help an already struggling economy.

“Rather than settling appropriations for the 2014 budget, the result was a continuing resolution that will fund the government through January 15 and suspend the debt ceiling until February 7. This resolution does little to defray the concerns of workers and consumers alike, demonstrated by the plummeting measures of consumer and business confidence in October,” she said.

The monthly Wells Fargo outlook suggests slower overall economic growth in the fourth quarter, with conditions improving in 2014.

U.S. economic activity increased at a 2.8 percent pace in the third quarter, but much of the gain was due to an outsized increase in inventories. However, real final sales, which exclude inventories, moderated to a 2.0 percent pace. The gain in inventories sets the stage for a slower pace of growth in the fourth quarter. We now expect real GDP in the fourth quarter to increase at only a 1.8 percent pace,” noted the Wells Fargo report. 

The report predicted that “economic growth in 2014 is expected to pick up from its moribund pace this year led by improving consumer spending, business fixed investment and homebuilding.”

ARKANSAS TRUCKERS
The third fiscal quarter was good for most Arkansas-based trucking and shipping companies.

P.A.M. Transportation Services Inc. reported net income of $2.39 million in the third quarter of this year. Profits surged 171% from the $880,907 pocketed a year ago. 
Revenue also rose 6.4% to $101.87 million in the quarter ending Sept. 30.

The quarterly net income for Fort Smith-based Arkansas Best Corp. more than doubled the $6.518 million reported during the third quarter of 2012, and the revenue was up almost 8% compared to the 2012 quarter. Helping fuel the improved results was a 4.3% uptick in tonnage during the quarter and a 4.5% increase in per-day shipments.

Lowell-based J.B. Hunt’s net income rose 14% to $89.47 million in the third quarter. On a per-share basis that equates to 75 cents, compared to 65 cents per share earned a year ago, falling short of the 78-cent average consensus from two dozen analysts that regularly follow the company. Total revenue rose to $1.435 billion, up 10.8% and inline with expectations for the third quarter period.

However, Van Buren-based USA Truck again posted a quarterly loss, but the loss was lower than expected. Cash flow improved and revenue was up almost 14% – overall a much-needed improvement for a company facing a hostile takeover and five consecutive years of losses. Also, The 6 cent per share loss was better than the consensus estimate of 10 cents per share.