Truck Tonnage Nears Record After 3.6% Increase in July

This story appears in the Aug. 25 print edition of Transport Topics.

Truck tonnage is moving closer to record territory, American Trucking Associations said last week, as stronger factory and housing activity pushed the index 3.6% higher in July.

ATA’s advanced seasonally adjusted index reached 130.2, just 0.6% short of the 131 record set in November. The Aug. 19 report showed a 1.3% rise over June, which followed a 0.8% decline in June from May.

“The solid tonnage number in July fits with the strong factory output reading and a jump in housing starts for the same month,” ATA Chief Economist Bob Costello said.

Government reports showed that factory output in July was the strongest in 21/2 years, rising 1.1% to a record, and a 16% increase in housing starts.

“After a surprising decrease in June, tonnage really snapped back in July,” Costello said. “This gain fits more with the anecdotal reports we are hearing from motor carriers that freight volumes are good.”

Analysts including Deutsche Bank’s Robert Salmon and Lee Klaskow at Bloomberg Industries underlined the trend.

Salmon highlighted a favorable demand environment for last month and said that, in August, load board data are positive year-over-year.

Klaskow noted that the July improvement pace over June topped historical growth trends.

“Momentum has carried over into the third quarter,” he said. “Trucking fundamentals continue to improve in favorable economic environment with tighter capacity and higher demand.”

Evidence of the strong manufacturing, construction and housing markets was apparent among flatbed carriers, Mark Montague, an analyst for load board operator DAT, told Transport Topics.

“Flatbed has been absolutely solid this summer,” he said, as reflected in loads moved and rates at least 10% above July 2013 in that sector.

Business was particularly strong in Memphis, Tennessee, where 40 potential loads were posted on DAT for every available truck on Aug. 19.

“The tonnage report is telling us things are pretty darn good,” said James Meil, who is principal of industry analysis for ACT Research. He also noted the contribution from manufacturing and housing.

“The manufacturing sector, which is always important to trucking, has advanced well beyond the winter problems,” Meil told TT Aug. 20, with uninterrupted growth since storms receded.

Housing was expected to improve after the spring because of pent-up demand from winter.

“That didn’t happen then,” Meil said. “Sales, permits and starts looked weak. The housing market is on its feet now, with 6%-7% price gains.”

One sector that was weaker was retail sales, which were unchanged.

However, Costello told TT that a single reading didn’t create a trend, because that indicator has risen for five straight months.

Retail sales should rise over the long term, he said, because of continued job growth that totaled more than 500,000 new positions added during June and July.

Freight actually hauled, as measured by ATA’s non-seasonally adjusted index, was 133.3 in July, 0.8% better than June and 2.9% above the 2013 period.

For the full year, expected tonnage improvement in the 3%-3.5% range represents good growth, Costello said, though that pace will moderate from last year’s 6.2% advance, which was the fastest growth in 15 years.

The full-year projection indicates stronger improvement as the year unfolds, since tonnage has gained 2.9% for the first seven months, dragged down by January’s freight weakness.

One reason for optimism is that the second-half economy is shaping up better than 2013, Meil said, stimulating demand for equipment as well as freight.

“There are no big immediate threats out there,” Meil explained, unlike last year’s government shutdown that slowed the economy. “Those stumbling blocks that were concerns in the second half of last year are not in place.”

One unusual feature this summer, Montague noted, is the trend in domestic dry van freight that appears to be linked to changing international shipping patterns.

The shift was driven, he said, by moves to avoid possible disruptions after expiration of the June 30 contract covering West Coast dockworkers.

Dry van markets have softened in recent weeks in distribution hubs such as Los Angeles and Atlanta, as freight that arrived early sits in distribution centers before being shipped to retailers.

On the other hand, there has been an unusual rise in dry van activity in July and early August at East Coast ports that apparently received cargo shipped there to avoid West Coast issues, the DAT official said.

There also have been pockets of strength in the refrigerated market, driven by produce shipments from California and elsewhere, Montague said.