Freight Shows More Growth in February Despite Series of Severe Winter Storms

This story appears in the Feb. 21 print edition of Transport Topics.

Several February reports appear to indicate that a steadily improving economy holds long-term promise for trucking, despite the negative freight effects of recent winter weather.

The upbeat assessment is based on a 12% rise for the Cass Freight Index, record-high January TransCore load board activity, an increase in the Ceridian-UCLA Pulse of Commerce Index and a positive report from Transportation Fundamentals.

Weather disruptions, which cut into some carriers’ first-quarter profits, do “not signal another long-term downward trend for freight but is rather one of the bumps expected during the recovery,” said economist Rosalyn Wilson, who wrote the Feb. 4 Cass Index report.

“Industrial production has been rising for the last several months, and manufacturing orders have also picked up substantially, both of which will lead to increasing freight volume,” said Wilson, who works for Delcan Corp., Vienna, Va.

While the overall outlook appears bright, FedEx Corp., Memphis, Tenn., warned on Feb. 14 that profits would fall about 25% below Wall Street estimates because of higher fuel prices and fierce storms.

The Cass shipments index, which is based on freight bill processing and is primarily composed of trucking business, rose in January despite the winter weather, demonstrating a continued economic recovery, Wilson said.

Noel Perry, an economist who heads consulting firm Transportation Fundamentals, Lebanon, Pa., sounded a similar theme during a Feb. 10 webinar.

“The economy is still getting better,” said Perry, who added that business growth could exceed the average economists’ forecast of a 3% improvement in gross domestic product. “The environment is good for freight.”

Perry predicted that truck tonnage will rise about 5% this year because a strong manufacturing climate is overcoming obstacles such as high consumer debt, a weak housing market and high unemployment.

The Ceridian-UCLA Pulse of Commerce Index rose 3.4% in January from a year earlier, a 14th consecutive year-over-year increase for the index. The growth was accomplished despite storms last month that reduced truck fuel purchases at truck stops by one or two percentage points, the report said.

“The PCI clearly shows that the economic recovery remains on track,” said Ed Leamer, chief economist for the survey.

TransCore said January activity for its load matching service was the strongest for that month in six years.

David Schrader, TransCore senior vice president, attributed the heightened activity to tightening freight capacity, shippers’ efforts to find available trucks during weather disruptions and a generally positive business outlook.

Perry and analyst Jon Langenfeld of Robert W. Baird said next month could bring a sharp rise in freight.

Langenfeld cautioned that January and February demand is “a poor indicator of future demand given the seasonal softness.”

“March and beyond are traditionally better indicators,” Langenfeld said. “The ability of the recent strong spot market strength to carry into March would be a critical confirmation of recent weeks’ demand.”

“We have had a particularly low level of freight in February,” Perry said. “That means we will get a particularly wicked swing in demand between February and March this year. March, April and May will be very positive.”

Analyst Ed Wolfe of Wolfe Trahan was more cautious.

“Freight felt much stronger last year than the general economy into inventory restocking and faster inventory turns,” Wolfe stated. “It’s clear that inventory restocking has showed from a torrid pace during the first half of 2010. Inventory has shifted from a strong positive more of a slight positive. Inventory could turn into a negative for freight at some point in 2011 without a further uptick in the domestic economy.”