Freight Falls as Sales Rise

Freight levels continue to dive, even as there are increasing signs that the recession’s bottom has been touched and most economists are predicting that U.S. economic growth will resume in the year’s last quarter.

American Trucking Associations’ truck freight tonnage index in April fell 13.2% below the year-ago levels and dipped to the lowest point since the aftermath of the terrorist attacks of 2001 (see story, p. 1; click here for subscriber-content story or here for previous online story.)

The drop in aggregate tonnage occurred even as a number of fleet executives reported recently that business in April was better than in previous months, and other surveys pointed to better times.

Orders for durable goods in April were up 1.9%, the government reported May 28, the largest increase in 16 months and well above estimates. Initial jobless claims also have been coming down a bit, and existing home sales have been rising.

Some retailers have been seeing sales increases, and banks have reported increased profits. 

But it appears that many retailers simply are reducing their inventories and are not restocking their shelves, out of concern that the sales bump may be temporary. Truck traffic won’t increase markedly until companies order replacements for their stores.

Low freight demand has led to slipping prices for truckload and less-than-truckload services, carriers and shippers said at a recent industry conference (see story, p. 3; click here for subscriber-content story).

And Class 8 new truck registrations in March reached their lowest point since record-keeping began in 1985, according to the latest survey by R.L. Polk & Co. The first-quarter total was 40% lower than the year earlier.

All of this economic news develops against a backdrop of resurging fuel prices. Last week, the Department of Energy reported, the national diesel average rose another 4.3 cents, the third straight weekly rise.

Gasoline prices were sharply higher, jumping 12.6 cents, the seventh consecutive increase.

While prices for both fuels are substantially below year-ago record levels, the rise in costs at a time when business is shrinking and freight levels are declining bodes ill for all fleets.

When fuel was skyrocketing last year, there was still generally enough business to provide carriers with sufficient leverage to enforce surcharges. These days, carriers have little pricing power and are surely going to face more customer resistance if fuel costs prompt them to seek new surcharges.

This trend underscores the need for carriers to ramp up their efforts on fuel efficiency.