Freight industry data points to stronger U.S. economy

Two national freight reports suggest that 2014 may be one of the best years for shippers since the end of the Great Recession, and that tonnage is up and moving despite “costly freight bottlenecks” at the nation’s largest port resulting from on again, off again union contract negotiations.

The American Trucking Associations’ Truck Tonnage Index was up 3.5% in November after a 0.5% increase in October. Year-to-date, tonnage is up 3.3% compared to the same period in 2013.

However, the not-seasonally adjusted index, which represents the real change in tonnage hauled by the fleets, was down 10.5% compared to October.

“With strong readings for both retail sales and factory output in November, I’m not surprised that tonnage increased as well,” ATA Chief Economist Bob Costello noted in the November report. “However, the strength in tonnage did surprise to the upside.”
 
Continuing, he noted: “The index has increased in four of the last five months for a total gain of 6.4%. Clearly, the economy is doing well with tonnage on such a robust trend-line.”

According to the ATA, trucking serves as a barometer of the U.S. economy, representing 69.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.7 billion tons of freight in 2013. Motor carriers collected $681.7 billion, or 81.2% of total revenue earned by all transport modes.

The Cass Freight Index reported that shipments were up 4.2% in November compared to November 2013, and freight expenditures were up 5%. However, November shipments were 0.2% below October numbers, and expenditures were down 0.7% compared to October.

Cass uses data from $22 billion in annual freight transactions to create the Index. The data comes from a Cass client base of 350 large shippers.

November’s slight decline compared to October was not a surprise, said 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.

“This was not unexpected given the fact that retailers stocked up early in anticipation of problems at the West Coast ports. While November is generally a slower month for freight movement, the last several years have shown dramatic drop-offs in November. So, in context, this slight downward shift is an encouraging improvement that is helping to cap off a good year for freight,” Wilson said.

Wilson said the shipping industry has had possibly its best year since the Great Recession.

“The first eleven months of 2014 have shown this to be the best year for freight that we have experienced since the recession. Freight volumes are up and costs to move that freight are also trending up. This is good news for the nation’s carriers in spite of the headwinds being battled (port congestion, throughput capacity, and port labor problems),” Wilson noted in her report.

She also said the port congestion problems in Los Angeles/Long Beach and Oakland will likely continue into next year. The port issues will also have an impact on the holiday shopping season.

“Not all shippers were able to avoid deliveries to West Coast ports in November and they are experiencing three week – or longer – delays in receiving their goods. Labor issues, chassis shortages and inefficient chassis distribution, port throughput limitations due to heavily loaded, larger TEU ships, and rail capacity problems have combined to create costly freight bottlenecks at the ports of L.A., Long Beach and Oakland,” Wilson noted.

Following are other economic notes from Wilson’s November freight report.
• “It remains to be seen how this year’s holiday season will shake out, but there is no doubt that consumers are spending again, both on goods and services.”

• “Early estimates show that store traffic was down 5.2% compared to last year’s Black Friday totals and sales are expected to be 11% lower than last year. Lower gas prices were expected to fuel more spending, but consumers are still behaving conservatively and holding out for even further discounting.”

• “Manufacturing production slipped somewhat in November, but new orders, order backlog and exports all rose during the month. Unlike the last six years, the fourth quarter of 2014 is not going to show a precipitous slide downward, only the normal seasonal slowdown we experienced in the years prior to the recession. 2014 will prove to be the banner year that was predicted and 2015 should be looking at a strong start.”

• “The weather forecast for this winter does not look much better than last year, so the transportation system could be faced with the same problems the railroads faced in the Northwest last year. Aggressive capital investment programs announced by UP and BN will eventually improve the situation, but rail lines are not laid overnight and the necessary new equipment and trained personnel will also take time to bring into action.”