February Tonnage Sets Record

This story appears in the March 28 print edition of Transport Topics.

Truck tonnage jumped 8.6% in February, posting an all-time record that was helped by freight that moved later due to January storms, American Trucking Associations reported last week.

While the trade federation’s seasonally adjusted for-hire index reached 144 to best the previous high of 134.7, ATA Chief Economist Bob Costello said, “I caution everyone not to read too much into it” because February tonnage typically is relatively weak in comparison to March and the following months.

“The strength was mainly due to a weaker-than-average January, including bad winter storms, thus there was some catch-up going? on in February,” said Costello, who consistently cautions that single -month tonnage readings need to be placed in context. “This was more a statistical blip than anything else. If March is strong, I’ll stand corrected and that would be good news, for sure.”

On a sequential basis, the February reading departed from recent years. The 7.2% gain in 2016 compares with sequential drop-offs of 5.4% to 6.7% over the past three years. February’s year-over-year gain was the largest in more than two years. Record index levels previously were reached in November and December of last year.

The raw index, not seasonally adjusted, measuring freight actually hauled, also rose on a year-over-year basis, climbing 8.2% to 129.

“The important point to note here is that February, on a not seasonally adjusted basis, was not ‘strong’ as it was up just 0.4% sequentially [from January],” Costello said.

Others who closely follow trucking trends were similarly cautious.

Chuck Clowdis, a managing director with consultant IHS Inc., described February as “in line with what we are seeing in an economy where the slow recovery is inching along.”

He told Transport Topics on March 23 that he doesn’t expect there will be either “a tremendous rebound or a dramatic surge anytime soon” since there are no strong signs of a pickup during March.

“The economy is waiting for something to happen, probably the general election. Consumers aren’t sure what will happen, so there is a lot of pent-up demand,” said the former industry official. “People have to be more comfortable before they start spending money.”

James Meil, an economist and industry analyst at ACT Research Co., said that while the February tonnage number looked very good, the bottom line generally is “the same old, same old, a slow-moving economy.”

The ACT analyst acknowledged that those who watch the economy closely can see what he termed “a little bit of strength” in some sectors, such as housing and manufacturing.

“That said, there is nothing to suggest a big incremental improvement anywhere and nothing to suggest a break point for the better for motor freight,” Meil added.

While Costello emphasized the statistical effect on the February report, he also acknowledged broader positive indicator trends in the economy from factory output and housing starts.

Factory output had the highest percentage increase since October and stands at the highest level in eight years.

Single-family housing starts were 37% above February of last year and stand at the highest level since November 2007, the Census Bureau reported. Also, retail sales in February were 4.8% above the same month of 2015, the largest year-over-year gain since September, excluding fuel sales.

On the spot market, March is better overall than February, DAT Solutions analyst Mark Montague said, but still is a bit slower than a normal year, particularly for van and refrigerated freight.

Costello also repeated a concern he has highlighted in nine consecutive tonnage announcements.

“I’m still concerned about the elevated inventories throughout the supply chain,” he said. “We need those inventories reduced before trucking can count on more consistent, better freight volumes. Last week, the Census Bureau reported that relative to sales, inventories rose again in January, which is troubling.”

That report showed the January ratio of inventory to sales was the worst since the depth of the recession.

In the spot market, flatbed freight in March has heated up across the South, partly because of warmer weather that encourages construction, and in the Midwest to support vehicle production, Montague said.

Another explanation for the flatbed upswing, he said, were indicators that increased crude prices over the past month could be prompting companies that completed, and then capped, oil wells due to the sharp drop-off in oil prices to begin pumping crude from them.

Heavier-than-expected international container freight on the West Coast is a positive for van fleets, but refrigerated business is being hurt by California’s drought. Some cross-border produce from Mexico is filling in the gaps in the perishables market, he added.

ATA revised January 2016 tonnage to a 0.3% decline.