April Tonnage Gains 4.8%

This story appears in the May 26 print edition of Transport Topics.

Truck tonnage rose 4.8% last month from a year earlier as carriers distanced themselves from winter’s freight disruptions, setting the stage for more growth amid a strengthening economy.

American Trucking Associations said last week its advanced seasonally adjusted index reached 129.1 in April, an improvement of 1.5% on a month-to-month basis. The April result was the best monthly year-over-year increase in 2014.

“Tonnage has been making solid progress after falling a total of 5.2% in December and January,” ATA Chief Economist Bob Costello said. “April’s nice gain was better than the contraction in industrial production and the lackluster retail sales during the same month.”

ATA’s announcement was issued after recent economic reports that industrial production and housing, two key drivers of tonnage, have perked up. That brightened the economic picture that was dimmed after the dismal 0.1% increase in first-quarter gross domestic product reported April 30.

Costello told Transport Topics that last month’s housing market improvement, as well as a post-winter catch-up effect, helped tonnage last month.

Tonnage has risen 4% since January and has gained 2.9% this year.

Costello told TT he expected that full-year tonnage growth would be 4.5%. Sustained growth similar to the April percentage level would be required for the rest of the year to hit that target.

However, an industry analyst report wasn’t as upbeat.

“The challenging weather in the first quarter created a widespread hope that the economy would broadly accelerate once the snow melted and pent-up demand was released,” Stifel Nicolaus analyst John Larkin said in an investor note.

“General freight volumes are reflective of the mediocre economic growth,” his report said. “While some pockets of economic growth exist [e.g. Texas, North Dakota, Silicon Valley], the average American is still struggling to make ends meet. Their struggles are reflected in the weak sales posted by big-box retailers, of late.”

But recent commentary from three carriers, four separate trend reports and an economist at trucking supplier Eaton Corp. reinforced Costello’s view.

James Welch, CEO of YRC Worldwide Inc., which ranks No. 5 on Transport Topics Top 100 for-hire carriers in the United States and Canada, offered this assessment last week: “April [freight] felt much better; that continued in May. It will be interesting to see if it carries over into June.”

No. 22 Saia Inc. reflected optimism in a May 20 regulatory filing that said tonnage per day rose 7.5% last month, and more than 8% in May.

Chief Financial Officer James Darby, speaking at an investor conference, said part of the reason for growth was freight that was hauled at this time last year by Vitran Inc. in the United States. Vitran exited the domestic market last fall.

There also has been “a little bit” of diversion of freight to less-than-truckload carriers from capacity-squeezed truckload fleets, he said.

John Steele, CFO at No. 13 Werner Enterprises, earlier this month said pricing is strengthening and that “better times are ahead for the truckload industry.”

Load board operator DAT saw seasonal freight trends return last month to the spot market after winter-related increases, director of marketing Ken Harper told TT.

Demand strengthened again overall in mid-May, reflecting stronger shipments of manufactured products such as culverts made in Florida, where produce typically is the primary outbound freight, said Mark Montague, a DAT pricing analyst.

“Growth has been broad-based,” Montague said, including strength in Dallas, Atlanta and other domestic markets as well as international cargo growth at Seattle, tied to dock contract talks before a June 30 contract expires. He credited housing, energy, retail and manufacturing as trucking’s growth factors.

Another upbeat indicator was a monthly trucking index from ACT Research, whose index has been rising year-over-year for 16 straight months. Sixty percent of April survey respondents reported that freight increased.

The weekly market report from Internet Truck Stop showed stronger demand as well, primarily in the South and Midwest.

The Cass Truckload Linehaul Index report said “demand continues to improve while capacity tightens,” leading to a 5.7% rise in April rates that now are at record levels. That index excludes fuel and accessorial revenue.

ATA’s index of freight actually hauled stood at 131.5 last month, 1.6% better than March and 4.4% above the same month in 2013.

“We expect a bounce back in May and June,” said Arun Raha, chief economist at Eaton, which provides services to manufacturers as well as trucking.

“Until I see otherwise, one month’s data doesn’t make me worry,” he said, referring to the GDP number.

He cited two reasons for optimism: One was the recent upswing in housing, including a 13.2% annualized rise in starts last month, after a pause of several months linked to rising home prices and interest rates. Another is purchasing managers’ index readings by the Institute for Supply Management, which serve as a leading indicator for manufacturing activity.

The April PMI registered 54.9%, up from March’s reading of 53.7%, indicating expansion in manufacturing for the 11th consecutive month, according to the organization.