By Rip Watson, Senior Reporter This story appears in the June 13 print edition of Transport Topics. Click here to subscribe today.
The Cass Freight Index, which measures freight bills paid for shipments moved primarily by truck, rose 9.6% in May from the same month a year ago, but the latest report showed a slow-down in the growth pace tied to the economy.
The June 6 report issued by the St. Louis-based company noted that the year-over-year improvement was less than the 12.3% growth recorded in April 2011 from the prior year. In addition, shipments last month were 0.2% less than April 2011, the report said.
“Although many industry obser-vers are still predicting a strengthening as we head to the second half of the year, the underlying pieces are not falling into place to support anything more than weak growth,” Rosalyn Wilson, an economist for Delcan Corp., wrote in the report.
Wilson cited the slower-than-expected 1.8% growth pace in gross domestic product during the first quarter, as well as reduced expectations among economists, who now peg second-quarter GDP growth between 2.5% and 3%.
She also said trucking is feeling the effects of lower shipment levels in May, compared with earlier months.
“The volume slowdown, coupled with the fuel surcharges, slowed down any real [freight] rate growth that we experienced earlier in [May],” she said. “Capacity is still not a widespread issue, so there is no pressure from the demand side to push rates up.”
Her broad message was to expect little growth.
“The economy is in a stall, and what remains to be seen is the extent,” she said in her report. “The economy began to weaken after the impacts of the federal stimulus diminished, and contraction in the public sector has removed jobs and funds that went into the private sector.”
Wilson cited slowdown-related factors in the consumer economy, such as a slow buildup in inventory and retailers’ efforts to stimulate purchases by offering additional discounts, and she noted a recent drop in consumer confidence.
She also said that the only signs of increased consumer spending were fuel purchases and at discount stores.
Prices are rising for basic purchases such as food, fuel and medicine, leaving consumers with less money for discretionary purchases, her report said.
To compound matters, she said, manufacturers have slowed both investment and hiring, which had been strong points in economic reports earlier this year.
In addition, forecasts suggest imports and exports will be little changed or even have dropped from April to May, further hurting freight volumes, Wilson added.
Cass also measures spending on freight shipments, which rose just 1.7% in May from April. The year-over-year growth rate was 29.9%, reflecting the effect of higher fuel surcharges as a result of higher diesel prices.
