Freight Tonnage Jumps 6.8% in June

Freight tonnage carried by motor carriers during June rose by 6.8% over year-ago levels, according to American Trucking Associations, the largest gain in five months and a positive sign amid uncertainty about the U.S. economy.

ATA’s advance seasonally adjusted tonnage index jumped to 115.8, the highest since January. On a month-to-month basis, the index rose 2.8% after declines in three of the past four months. Overall, ATA’s index has risen for 19 consecutive months year-over-year, a string that began in December 2009.

“Motor carriers told us that freight was strong in June and that played out in the data as well,” ATA Chief Economist Bob Costello said.

“After growing 5.5% in the first half of the year from the same period last year, the strength of truck tonnage in the second half will depend greatly on what manufacturing output does,” Costello said. “If manufacturing continues to grow stronger than [gross domestic product], I fully expect truck freight to do the same.”

Last week’s round of economic reports reflected continued uncertainty.

The lone bright spot was the Conference Board’s consumer confidence index, which rose 1.9 percentage points to 59.5 in July, possibly because the rise in fuel prices has eased.

However, the Federal Reserve’s Beige Book report noted growth slowed in eight of 12 regions, and new-home sales fell, along with their prices. In addition, orders for goods designed to last at least three years fell 2.1% in June, reversing a 1.9% gain in May, the Commerce Department reported.

Other indicators within ATA’s report appeared more favorable.

The not-seasonally adjusted improvement in June was enough to overcome the losses in April and May, when the index contracted a total of 2.6%. The not-seasonally adjusted index, which reflects actual tonnage hauled, reached 122.3 in June, a 5.3% improvement above the May level.

Comments from Werner Enterprises Inc. in its July 20 earnings report confirmed the market improvement in June.

“Freight volumes strengthened in June 2011 from April and May,” the truckload carrier reported, noting that this year’s volume levels lagged behind the same period of 2010, when all three months were strong.

Knight Transportation Inc. also noted difficult comparisons with second-quarter 2010 freight markets in a July 26 announcement.

Both Werner and Knight overcame that hurdle to post higher quarterly earnings than the year-earlier period.

Most other truckload and less-than-truckload fleets also managed to report improved earnings through a combination of cost management and rate increases fostered by reduced industry capacity.

But comments from executives at publicly traded companies also zeroed in on the questions ahead.

Steve Russell, CEO of Celadon Group Inc., Indianapolis, commented on negotiations in Washington to raise the federal debt ceiling.

“Confidence in America has been adversely affected by what’s going on with the debt ceiling [negotiations],” Russell said. “It’s having an impact on the economy. I’m 71 years old, and I’ve never lived through an issue facing America as significant as this debt ceiling situation.”

UPS Inc. on July 26 concentrated on the slowing pace of economic growth, highlighting the steadily lowered expectations for gross domestic product in the second quarter and beyond.

“Economic conditions have slowed since we last provided [earnings] guidance,” Chief Financial Officer Kurt Kuehn said. UPS anticipates a wide range of outcomes, ranging from 1.5% GDP growth to 3.5%.

At one point earlier in the year, economists forecast GDP would rise 3.1% this year, a number that was lowered to 2.9% and now is 2.5%.

Economists also were wary.

“The momentum in capital spending has slowed,” Ryan Wang, an economist at HSBC Securities USA Inc., told Bloomberg News on July 26. “Unless we get a pickup in consumer demand, the overall rebound in growth is going to be pretty moderate.”

“People are feeling a little bit better, now that falling gasoline prices have taken some of the burden off of their pocketbook,” said Russell Price, a senior economist at Ameriprise Financial Services Inc., who also spoke with Bloomberg.

Analyst reports highlighted some positive signs, including a predicted second-half pickup for trucking that builds on the June report’s progress.

Credit Suisse analyst Christopher Ceraso said in an investor note that he expects that second-half year-over-year tonnage growth will top the June pace.

At Jefferies & Co., analyst Peter Nesvold said the June increase was sharply higher than his expectation of 3% to 5% growth. July loads are following normal seasonal patterns, he said.

Justin Yagerman, a Deutsche Bank analyst, noted that “freight companies have seen a pickup in demand in recent months after suffering through difficult headwinds” earlier in 2011.