December Truck Tonnage Rises

This story appears in the Feb. 1 print edition of Transport Topics.

Truck tonnage rose in December for the first time in 15 months, year-over-year, as the U.S. economy picked up steam, American Trucking Associations reported.

The 6.6% increase pushed ATA’s seasonally adjusted for-hire index to 108.4, the highest reading since November 2008.

“Tonnage will likely continue to grow on the year-over-year basis, in large part because it was so weak a year ago,” Bob Costello, ATA’s chief economist, told Transport Topics on Jan. 25.

The index last rose year-over-year in September 2008, before the U.S. recession deepened. It dropped as low as 99.2 last April.

Fleet executives, at least in the truckload sector, confirmed the improving picture.

“As we moved through the 2009 fourth quarter, both the number of loads and rate per load continued to show signs of strengthening,” Landstar System CEO Henry Gerkens said Jan. 27, with daily volume growth between 5% and 10% in January.

Kevin Knight, chairman and CEO of Knight Transportation, said he believes “we are in the early stages of a turnaround in the truckload freight market.”

“We saw significant gains throughout the quarter, but overall demand was frankly surprising,” Celadon Group Inc.’s CEO Stephen Russell said during a conference call on Jan. 26.

For the U.S. economy as a whole, the latest forecasts continue to point toward growth, despite continuing troubles in sectors such as housing, where new starts and sales of existing homes fell.

The Conference Board’s index of leading economic indicators, intended to signal economic vitality at least three months into the future, increased for the ninth consecutive month in December. In addition, the board’s consumer confidence index hit a 15-month high in January.

While the outlook is brightening, Costello cautioned that tonnage and economic growth won’t continue to rise at the December pace.

“Economic growth will come back to Earth, so to speak,” from the estimated 5% improvement in the fourth quarter to a range between 2% and 2.5% growth this year, he said.

At the same time, Costello underlined the importance of a strengthening economy.

“It is fantastic news that we are growing,” he said. “It is going to be modest growth, but it is growth nonetheless.”

Sequential trucking trends also were positive as ATA’s index rose 2.1% in December after a 2.6% increase the month before.

“The robust tonnage numbers in November and December were aided by better economic growth, as well as a positive inventory effect,” Costello said.

“Inventory levels no longer will be a drag on trucking,” he said, because inventories have shrunk to the point that restocking has to continue to keep up with strengthening demand.

The ratio of all goods in stock relative to sales is 12% lower than it was a year ago, according to the Commerce Department.

In fact, retail inventories have shrunk to their lowest level ever, Costello said.

During a Jan. 26 webinar, he said he expects growth in manufacturing, housing, light vehicle sales and durable goods sectors. Growth should be gradual over two years, which should help to further boost freight demand, he said.

Two recent analyst reports also predicted growth.

“Truck tonnage is up 9% since its recent trough in April, and we expect tonnage to gradually improve as the economy strengthens and inventories are built,” Deutsche Bank analyst Justin Yagerman said in a Jan. 25 report that predicted improving results for truckload carriers.

The less-than-truckload outlook is less favorable because of significant excess capacity, he added.

“Truckload demand trends remain strong on both an absolute and year-over-year basis,” William Greene, a Morgan Stanley analyst, said Jan. 22. “As the economy continues to recover, we expect a restocking of inventories to produce the next leg of truckload volume growth.”

A spot trucking index compiled by TransCore of Hummelstown, Pa., that compares loads available and truck availability, also improved in December. It more than doubled from that month in 2008 and rose 11% in December from November levels.

However, not all news was positive.

The Cass Freight Index, a monthly report by St. Louis-based Cass Information Systems Inc. that measures freight spending and shipments, fell about 3% in December from November levels.

Taking a longer view, ATA’s index for the full year fell 8.3%, making 2009 the worst year since 1982. In that recession year, the index fell 12.3%.

The freight decline was hardly confined to trucking. Railroads based in the United States hauled 15% less freight last year, and ocean cargo moving through the largest U.S. ports also declined by at least 10%.

The index, representing the change in tonnage that fleets actually hauled before any seasonal adjustment, stood at 103 in December, up 2.3% from the previous month, ATA said.