Recent Reports Show Decline In U.S. Freight Sector Activity

First quarter numbers in the overall freight sector suggested a robust U.S. economy for 2015. But recent declines in the American Trucking Associations’ Index and the Cass Freight Index have resulted in mixed views about U.S. economic conditions.

The April Cass Freight Index showed that shipments were down 2.5% compared to April 2014, and freight expenditures were down 4.7%.

Rosalyn Wilson, a supply chain expert and senior business analyst with Pasadena, Calif.-based Parsons, who provides economic analysis for the Cass Freight Index, said the U.S. economy got off to a slow start in 2015, but she expects growth in the remainder of the year.

“Production was soft in the first four months of 2015, but factory orders rose 2.1 percent in March after seven months of decline. A 13.5 percent jump in transportation equipment orders was responsible for much of the turnaround,” Wilson noted in her April report. “Consumer confidence is at its highest level in eight years, which is contributing to improved numbers for the retail sector. U.S. imports were up 9.1 percent in March (the latest month available) and are forecast to continue to grow.”

Cass uses data from $26 billion in annual freight transactions to create the Index. The data comes from a Cass client base of 350 large shippers.

TRUCKING NUMBERS
The American Trucking Associations’ Truck Tonnage Index was down 3% in April and followed a revised gain of 0.4% in March. Year-to-date, tonnage was up 3.8%.
 
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, was 5.9% below March. Truck tonnage is down 5.3% from January.

“Like most economic indicators, truck tonnage was soft in April,” ATA Chief Economist Bob Costello said in his report. “Unless tonnage snaps back in May and June, GDP growth will likely be suppressed in the second quarter.”

Costello was not as optimistic as Wilson about economic trends.

“The next couple of months will be telling for both truck freight and the broader economy. Any significant jump from the first quarter is looking more doubtful,” he said.

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.

Other notes from Wilson’s report included:

• Manufacturing should perk up in the coming months as demand increases. With the strong dollar, raw material prices are lower for imported materials;

• Although capacity is not a problem, many companies have already announced increased levels of capital investment to update and improve plant and equipment;

• Although construction spending slipped in March, first quarter 2015 spending is 3.2% higher than the same period a year ago. Drops in drilling and energy exploration accounted for a significant portion of the drop in non‐residential construction. With warmer months ahead, construction should pick up steam; and

• The global economic picture is not as strong as the U.S. picture, so exports will continue to be weak.

RAIL REPORTS
Slowing activity in the freight sector was also noted in a weekly rail report from Little Rock-based Stephens Inc. As of May 16, the Stephens report produced by Research Analyst Justin Long and Research Association Brian Colley, showed that week 19 rail carloads were down 3% year-over-year, and year-to-date carloads are down 0.3%.

The report noted: “Overall, the largest decreases in industry volumes came from coal (down 15.3%), metallic ores & metals (down 16.5%), non metallic minerals (down 10.6%), chemicals (down 5.0%) and petroleum & petroleum products (down 7.1%). The largest increase came from intermodal (+4.9%).”

However, the Cass report said rail shipments were up “substantially” in April, with intermodal traffic up 27.6%.