December Tonnage Slips 0.7%

This story appears in the Jan. 30 print edition of Transport Topics.

Truck tonnage decreased 0.7% in December, marking the third and final year-over-year decline of 2016 in the monthly index from American Trucking Associations, but analysts and economists remain optimistic that 2017 will be a better year for the freight industry.

For the full year, tonnage was up 2.5% compared with 2015.

Sequentially, tonnage fell 6.2% in December after a strong November, which logged a rise of 8.2%.

The preliminary seasonally adjusted tonnage index for the month was 133.8 versus 142.7 in November. The record high was 144 in February 2016. The index uses a base level of 100 for freight activity in the year 2000.

“The ups and downs that plagued most of 2016 continued in December,” ATA Chief Economist Bob Costello said. “I don’t recall a year in recent memory with so many large swings on a month-to-month basis.”

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets, was 133.9 in December, which was 1.6% below the previous month.

The ACT Research Co.’s For-Hire Trucking Index posted a strong December that, while lower sequentially, compared favorably with the same month in 2015 since three out of the four categories were higher year-over-year.

The index is derived from a survey of trucking companies, and 50 is the dividing line between expanding or contracting economic conditions. The volume index was 45, down from 53.8 in November and 45.7 in December 2015. The pricing index was 54.3, up from 52.1 one year ago but down from 55.1 last month. The capacity index was 52.5, up from 50.4 in December 2015 but a decline from 53.5 in November 2016. The productivity index was 47.1, up from 46.4 year-over-year but down from 51.9 sequentially.

“December is always a little bit peculiar just because of the retailer rush to build inventory in November and early December, and then all of a sudden the holiday stocking stops and freight activity takes a nose dive,” said Jim Meil, principal for industry analysis at ACT Research.

“If you look at 2015 versus 2016, it turned out to be a very solid December,” Meil said. “We think the industry has hit bottom, and we’re going to see better times in 2017. It will be tough year-over-year comparisons for the first half of the year, but by the springtime or summer, we’ll have a sense that things are improving and it will be positive in the second half of the year.”

The DAT North American Freight Index increased 8% sequentially, the sixth straight month of higher rates and volume. DAT calculates data based solely on spot market data, whereas the ATA tonnage index is a mixture of contract and spot market but weighted toward contract freight.

DAT industry analyst Mark Montague told Transport Topics that he believes the turning point in the spot market occurred in May when rates and volume began to come back up from the lowest levels. The index dropped on a year-over-year basis from January through July but has improved every month since August.

E-commerce and grocery items contributed most to the December freight, according to the DAT report.

“The distribution centers that ship e-commerce items often assemble them into truckload lots. Activity between major hubs for e-commerce, such as Memphis, Tennessee; Columbus, Ohio; Denver and Seattle, were up much greater than the traditional hubs like Atlanta and Dallas,” Montague said. “As far as groceries, the harvests were above average for items such as Michigan apples, and potatoes and onions from Idaho, Oregon and Washington. There were a greater selection to choose from, which drives more transportation.”

The Cass Freight Index Report on shipments dropped 1.2% sequentially but rose 3.5% on a year-over-year basis. Expenditures fell 1.1% sequentially and 3% year-over-year. Cass uses information from bill payments through a St. Louis bank, which primarily is based on trucking but includes rail, air and barge freight.

“If the winter of the overall freight recession we’ve been in for more than a year and a half in the U.S. is not yet over, it is certainly showing promising signs of thawing,” wrote report author Donald Broughton, an analyst with Avondale Partners.

The Cass Truckload Linehaul Index, which tracks monthly changes in linehaul rates, declined 0.9% in December versus the same period in 2015.

Other economic indicators that influence freight conditions also were generally positive. The Institute of Supply Management’s manufacturing index, which measures new orders, inventory levels, production and the employment environment, rose to 54.7 in December. A reading above 50 shows that the industry was expanding. The Department of Commerce says retail sales rose 0.6% from November on a seasonally adjusted basis. Industrial production rose 0.8% sequentially and increased 0.5% year-over-year.

“Looking ahead, there are some positive signs for truck tonnage. This includes the continued spending by consumers, larger wage gains and solid home construction,” ATA’s Costello said. “Factory output will continue to be soft, but it should be better this year than last year. And most importantly, the supply chain continues to make progress reducing bloated inventories, which will help truck volumes going forward.”