Tonnage Index Rises 4.5%

This story appears in the Nov. 24 print edition of Transport Topics.

Truck tonnage rose 4.5% in October from a year ago and reached the second-highest level on record, American Trucking Associations reported.

ATA’s advanced seasonally adjusted for-hire index rose to 132.1 — just shy of the record 132.6 reading reported in August.

But last month’s percentage gain tied August for the strongest year-over-year growth recorded this year. It followed a 2.9% increase in September that was revised downward from 3.7%, ATA said in the Nov. 18 report.

Sequentially, last month’s tonnage also rose 0.5% from the September level.

ATA Chief Economist Bob Costello said October’s freight growth mirrors increases in retail sales and factory output during the month.

“Right there, you have two big drivers of freight,” he said. “You’ve got the consumer, and you’ve got the manufacturing base. Both of those were up, so it’s not a surprise that tonnage was up.”

Retail sales increased 0.3% in October, with 11 of 13 major categories showing growth, the Commerce Department reported Nov. 14.

“Paychecks are actually getting a little bigger, more people have jobs and, in inflation-adjusted terms, people have more in their wallets and they’re willing to spend it,” Guy Berger, an economist at RBS Securities Inc., told Bloomberg News.

The Federal Reserve reported that overall U.S. industrial production dipped 0.1% in October, but the critical manufacturing component actually advanced 0.2%.

Truck tonnage has grown from prior-year levels each month in 2014. Year to date, it has risen 3.2% compared with the first 10 months of 2013, ATA said.

Prior to seasonal adjustments, October’s tonnage index was 140.4, a 4.3% jump from the previous month.

ATA’s Costello described last month’s growth as a “good sign” for the fourth quarter and predicted a “solid” fall freight season, with the National Retail Federation forecasting the largest increase in holiday sales since 2011.

Carriers said their shipper customers have plenty of freight to move right now.

“The manufacturing economy seems to be much stronger year-over-year,” said Brian Kinsey, CEO of Brown Integrated Logistics, a dedicated shorthaul truckload

carrier and logistics provider in Lithonia, Georgia.

At the same time, freight demand for consumer packaged goods “is about as strong as we’ve seen it in five or six years,” he added.

Kinsey said the fall freight season has been “better than last year, and last year wasn’t all that bad.”

Rather than seeing a huge surge in business during the fourth quarter, the company has experienced steady and consistent growth over the course of the past several months, he said.

“We see the flatbed business booming right now,” said Jerry Carlton, CEO of TLX Transport, a flatbed and specialized carrier based in Mantua, Ohio. “Rates are still increasing.”

“Based on all our interactions with our customers, we look for next year to be another great year,” he added.

As tonnage continues to rise, freight hauling capacity has tightened.

“We’re seeing more acknowledgment by shippers and consignees of the limitations on capacity,” Brown’s Kinsey said. “They’re certainly more concerned now about being able to find capacity to get their shipments delivered.”

The spot market continues to command high rates, and many shippers are shifting their focus to simply finding a truck rather than hitting a specific cost target, he said.

Although capacity is tight, Costello said the industry can still handle the higher freight demand, but that might not be the case if the economy were to accelerate to another level of growth.

Another factor putting a strain on capacity is the shortage of qualified drivers, especially as freight levels continue to rise.

“All the trucking companies are experiencing it,” said Nancy Houghton, president of Green Valley Transportation, a specialized carrier based in Tracy, California, that delivers munitions and general freight for the Department of Defense.

She also cited insufficient transportation infrastructure and hours-of-service and other regulatory requirements as factors that are limiting driver productivity.

Carlton of TLX said the driver shortage is particularly pronounced in the flatbed market, where carriers are competing for the same drivers but are struggling to attract new ones.

He said his company tries to make the job easier for its drivers by providing user-friendly equipment, but flatbed work still involves application-specific challenges such as load securement and learning how to move specialized freight.

Carlton said the booming energy sector is pulling some potential drivers away from other trucking jobs.

“If the gas and oil business stays the way it is, I think you’re going to see a big-time strain on capacity,” he said.