Tonnage up, but U.S. freight shipments reflect ‘mediocre’ economy

The weight of materials shipped by truck grew an estimated 6.2% in 2013, but overall U.S. freight shipments were “mediocre” in 2013 and reflective of “another bumpy year in the recovery.”

The American Trucking Associations’ Truck Tonnage Index was up 0.6% in December after a 4.7% bump in November. For the year, the index is up 6.2% compared to 2012, making it the best year for the index since 1998. Tonnage, as measured by the ATA, increased 2.3% in 2012.

The not-seasonally adjusted index, which represents the real change in tonnage hauled by the fleets, equaled 123 in December, which was 1.4% below the previous month.

“Tonnage ended 2013 on a high note, which fits with many economic indicators as trucking is an excellent reflection of the tangible goods economy,” ATA Chief Economist Bob Costello said in his report. “The final quarter was the strongest we’ve seen in a couple of years, rising 2.2% from the third quarter and 9.1% from a year earlier.” 

Trucking serves as a barometer of the U.S. economy, representing 68.5% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, according to the ATA. Trucks hauled 9.4 billion tons of freight in 2012. Motor carriers collected $642.1 billion, or 80.7% of total revenue earned by all transport modes.
 
Costello, as he has in past reports, said the index gains suggest an economy that is better than some may think.
 
“I’m seeing more broad-based gains now. The improvement is not limited to the tank truck and flatbed sectors like earlier in the year. With manufacturing and consumer spending picking up, coupled with solid volumes from hydraulic fracturing, I look for tonnage to be good in 2014 as well,” Costello said.

Rosalyn Wilson, a supply chain expert and senior business analyst with Vienna, Va.-based Delcan Corp., said freight activity was relatively unremarkable in 2013.

“North American freight activity followed virtually the same path in 2013 as it did in the previous two years, concluding with the typical December falloff,” Wilson wrote in the report prepared for the December Cass Freight Index. “The climate for freight was mediocre throughout 2013, with the average number of monthly freight shipments 0.7 lower than in 2012. Inventories remained high, manufacturing stalled mid‐year, and exports and imports were relatively flat for most of the year. All of this contributed to another bumpy year in the recovery that hasn’t quite gotten there.”

North American shipments in December measured by the Cass Freight Index were down 6.2% compared to November, and were 3.2% below December 2012. December marked the largest monthly decline in 2013 and the third consecutive decline for the Cass index.

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.

Wilson provided the following observations about 2013 and thoughts on 2014.
• Freight shipment volumes experienced five three‐year lows during 2013, while freight expenditures hit eight three‐year highs.

• Unemployment fell, yet the number of new jobs created averaged below 2012. The number of workers leaving the labor pool has reached near‐historic highs.

• Increased inventory investment, a deceleration in imports, and strengthened state and local government spending were the strongest upward drivers of third quarter GDP. The first two do not drive shipping activity.

• Exports fell in the third quarter and the housing market, which was stronger in 2013, slowed in the fourth quarter. New starts lagged well behind permits issued, and new construction is what will lead to increased freight.

• Manufacturing gained strength for most of the year but at a very modest rate. Although better than 2012, which included several months of contraction, 2013 was still well below pre‐recession production levels.

• Looking forward to 2014 there are some hurdles, but the freight picture should strengthen as the year progresses. Congress is ahead of the budget issue – which had been kicked down the road in November – so another shutdown is unlikely.

• Transportation employment, especially in trucking, has been rising in recent months. Globally, new orders are up, but more for exports to developing countries than to the U.S. or Europe. The market for U.S. goods should strengthen by the second half.

• The high inventory levels are going to be drawn down in 2014, if for no other reason the fact that higher interest rates are going to make them more costly to carry. Consumers still hold the key to completing the recovery, and there are few signs that they feel confident to resume old spending habits.

• The lower labor participation rate plays a big role in the amount of disposable income available for anything but necessities. Many are finding that as their unemployment benefits end they still have few job prospects, so they are joining the ranks of those who are not actively in the labor market.