GDP, Cass Freight Index Show Positive Signs for Trucking
Two economic reports released on Nov. 29 brought some optimistic signs that the transportation and warehousing industries might be recovering from the problems of earlier in 2016, industry experts said.
The Bureau of Economic Analysis reported that the U.S. gross domestic product improved 3.2% to $18.7 trillion in the third quarter, higher than the initial estimate of 2.9%. The Cass Freight Index, which uses data from freight transactions processed through a St. Louis bank, showed that shipments went up 2.7% but expenditures went down 3.8% year-over-year.
The GDP increase included a 0.03 percentage point improvement in the transportation services sector, which consists of trucking and other freight transportation modes, reversing two consecutive quarters in which the sequential growth in the sector declined. Transportation services contributed $377 billion to the overall GDP, a 0.6% sequential increase and 2.4% improvement versus the third quarter of 2015. GDP measures the value of the goods and services in the economy minus the value used up in the production process.
“For the first time in six quarters, a build in inventories added to GDP [0.5 percentage points]. This isn’t necessarily a positive development, but hopefully it is a signal that inventories are closer to where they need to be and that the correction is nearly over. Not too optimistic about that, though. I think there are some more reductions needed, but we are getting closer,” ATA Chief Economist Bob Costello said.
Exports increased 1.18 percentage points, possibly due to more agricultural exports to China, according to Costello and figures from the Port of Oakland. On Nov. 15, port officials in Oakland announced that agricultural exports increased 16% as compared with 2015, primarily due to large increases in fruit, nut and meat exports destined for Asia. The Port of Oakland is one of the top export locations from the United States to Asia. But Costello said the export numbers will only be temporary.
“All in all, this was a good reading, but don’t expect it going forward. In fact, I’m expecting Q4 to come in at 2%,” Costello said.
Meanwhile, the Cass Freight Index shipment number rose for the first time in 20 months on a year-over-year basis, according to report author Donald Broughton, an analyst at Avondale Partners. He credited the results to volume growth in e-commerce, improving truck tonnage and better numbers from rail and barge transportation. Sequentially, the shipment index also improved 0.9%.
“Although it is far too early to make a ‘change in trend’ call, data is beginning to suggest that the consumer is finally starting to spend a little and that the industrial economy’s rate of deceleration has eased. Simply put, the winter of the overall freight recession we have seen for over a year and a half in the U.S. may not be over, but it is showing signs of thawing,” Broughton wrote.
While the expenditures index dropped 3.8% year-over-year, the results did offer a glimmer of hope because it was less bad than the year-over-year drop of 10.1%, 8.8%, 5.1% and 6.3% in May, June, July and August, respectively, he said.
“We see this increase as a result of the steady rise in the price of fuel over the last six months, but we are seeing some improvements in pricing power of truckers and intermodal shippers,” Broughton wrote. “Tonnage itself appears to be growing [three-month moving average +1.02 not seasonally adjusted]. Counter to this, truck loads have now contracted on a [year-over-year] basis five out of the last seven months. No matter how it is measured, the data coming out of the trucking industry has been both volatile and uninspiring.”
