Feb. Truck Tonnage Slips 1.7%

By Tarun Reddy, Staff Reporter

U.S. freight volume fell 1.7% in February compared with business levels of a year ago, marking the eighth straight monthly decline in the index compiled by American Trucking Associations.
Trucking officials cited weakness in the housing and automotive industries for the freight drop, as well as an overall slowdown in the economy.
Some carrier executives have reported a strengthening in de-mand in March and ATA’s February tonnage index was higher than the January numbers, but Bob Costello, the federation’s chief economist, said it was too early to suggest freight volumes would rise in the coming months.
“One month does not make a trend, and the February increase may be a blip on the radar,” Costello told Transport Topics.
Costello noted that January’s tonnage index fell 3.1% from December’s level. ATA revised the January figure from a preliminary estimate of a 3.6% drop.
ATA calculates the index using economic activity from the year 2000 as a base level of 100.
Costello said he will have a better idea of whether tonnage is showing an upward trend once the figures for March are calculated. “What we need to see is a sustained improvement in these figures.”
Costello said the outlook for tonnage is uncertain because many businesses have seen their ratio of inventories to sales remain relatively high. “If inventories are bloated compared with sales, then companies will not bring in more freight to be hauled.”
Last week, Federal Reserve Chairman Ben Bernanke said a slowdown in business spending, as well as housing construction, were the key obstacles to sustained growth.
Bernanke, in prepared testimony, told the Joint Economic Committee March 28 some firms are cutting production to “better align inventories with sales.”
Continued softness in residential construction is another factor in the uncertain outlook for tonnage, Costello said. Although housing starts in February were stronger than in the previous month, the annual rate is 28.5% below that of 2006, the Commerce Department said.
“I don’t think the recovery in housing has really started yet,” Costello said.
Bernanke told the congressional committee the weakness in residential construction “is likely to remain a drag on economic growth for a time,” as home builders try to reduce their inventory of unsold homes. He said lower capital equipment spending was another reason for the current economic slowdown.
An executive with truckload carrier Jet Express, Dayton, Ohio, said weakness in the auto industry has a major effect on his business. Kevin Burch, president of Jet Express, said tonnage dropped between 6% and 7% in February, compared with 2006.
Burch explained that many auto-component manufacturers have changed work schedules because of weak demand for new vehicles. “Many of the manufacturers have cut back on overtime shifts, especially on Saturdays,” Burch said.
He said freight volumes for Jet Express have improved a little in the past six weeks. If the economy improves for the remainder of the year, Burch said, the company could see a 1% to 2% increase in tonnage, compared with 2006.
Burch said the year-over-year decline in tonnage should not come as a surprise to the industry. “We were spoiled by three solid years of growth,” he added.
Jet Express now is having difficulty reducing the number of empty, or non-revenue, miles for its trucks, Burch said. “While we may be getting shipments, a lot of it is one-way,” he explained.
Even carriers that do not rely on the automotive industry have seen soft demand for freight. Steve O’Kane, president of A. Duie Pyle, said February tonnage “was down 1.5%, compared with a year ago.”
O’Kane said some of his customers “are moaning the blues right now” because of the soft economy. He said the firm’s tonnage was “almost flat” in February, compared with January.
However, O’Kane said freight volumes appear to be improving a bit in March. A. Duie Pyle, based in West Chester, Pa., provides truckload and less-than-truckload service.
While February tonnage dropped for Pyle, the company saw revenue increase, compared with 2006 levels, O’Kane said. The company’s revenue per hundredweight in February rose 2.5%, compared with a year ago.