Freight reports point to moderate U.S. economic growth for rest of 2014

Three broad reports note year-over-year tonnage and expenditure increases during July and the second quarter of 2014 in the U.S. freight industry, and suggest continued modest growth in the overall economy for the remainder of the year.

The American Trucking Associations’ Truck Tonnage Index was up 1.3% in July after a 0.8% decline in June, and was off just 0.6% from an all-time high in November 2013. For the first seven months of 2014, tonnage is up 2.9% compared to the same period in 2013, according to the ATA index.

The not-seasonally adjusted index, which represents the real change in tonnage hauled by the fleets, was up 0.8% compared to June.

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.

“After a surprising decrease in June, tonnage really snapped back in July. This gain fits more with the anecdotal reports we are hearing from motor carriers that freight volumes are good,” ATA Chief Economist Bob Costello said in the report.
 
Costello said tonnage is up 4.9% since hitting a recent low in January.
 
“The solid tonnage number in July fits with the strong factory output reading and a jump in housing starts for the same month. I continue to expect moderate, but good, tonnage growth for the rest of the year,” Costello wrote.

THE CASS REPORT
The Cass Freight Index for July showed shipments down 3.9% and freight spending down 3.9%. The declines were “consistent” with declines in previous summers, according to Cass report author Rosalyn Wilson, a supply chain expert and senior business analyst with Vienna, Va.-based Delcan Corp.

However, the July shipment volume was up 4.2% compared to July 2013.

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.

“The softness in the freight transportation market in July should not be seen as part of a longer-term trend downward. Even prior to the recession, the summer months were slower before the season rise for the holidays,” Wilson noted in the report.

She also blamed part of the slowdown on retailers with high inventories “being cautious about the orders they are placing for new stock.”

Wilson is positive about the back half of 2014, saying a turnaround in China’s purchasing managers index for export orders and growth in the U.S. manufacturing sector will be good for the freight industry. Improving GDP numbers and household wealth are also good signs.

“The first estimate of second quarter GDP was a growth rate of 4.0 percent, a significant turnaround from the 2.1 percent contraction in the first quarter. Corporate profits are strong, while consumer sentiment and household wealth are rising, putting both groups in a position to spend more this year,” Wilson wrote.

TRUCKLOAD OUTLOOK, WALL STREET
The second quarter 2014 Stephens TL (truckload) Index was up 3.6% compared to the 2013 quarter. Brad Delco, a transportation industry analyst with Little Rock-based Stephens Inc. and author of the report, said the gain was the 17th consecutive quarterly year-over-year increase.

“The 2Q14 increase was the highest year-over-year increase in the index since 1Q12 driven by a number of factors, in our opinion, including driver shortages, slightly improving demand and regulatory driven supply constraints,” Delco and associate Ben Hearnsberger noted in the report.

The quarterly increase was also up 2.1% on a sequential basis, better than the historical average second quarter increase of 1.3%. Delco estimated a third quarter sequential increase of 0.8%.

Among the nine truckload operators included in the Stephens TL Index, the average weekly revenue per tractor during the second quarter was $3,344, up from $3,189 in the first quarter and well above the 2013 average of $3,170. The nine carriers include Lowell-based J.B. Hunt, Tontitown-based P.A.M. Transport, and Van Buren-based USA Truck Inc.

Wall Street is also bullish on the transportation sector. The Dow Jones Transportation Average closed Tuesday at 8,414.89, up more than 0.11%, but trading near the peak of the 52-week range. During the past 52 weeks, the index high was 8,577.16 and the low was 6,212.54. Tuesday’s close was up 35% over the 52-week low.