January Tonnage Declines on Annual, Monthly Basis
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Truck tonnage started the year on the downslope, decreasing on an annual and sequential basis in January, and dashing cold water on hopes that the month might kick off a turnaround for the industry’s freight recession, American Trucking Associations reported.
The ATA For-Hire Truck Tonnage Index decreased 4.7% to 111.0 compared with 117.1 a year ago, the federation announced Feb. 20. On a month-to-month basis, the index decreased 3.5% compared with December’s 115.0 reading.
“January’s data was a snap back to reality for anyone thinking the freight market was about to turn the corner,” ATA Chief Economist Bob Costello said. “Bad winter weather in January likely hurt volumes, not to mention sharp drops in a number of drivers of tonnage including retail sales, housing starts and manufacturing output.”
That said, the Logistics Managers’ Index showed an uptick for the month. In January, the LMI registered 55.6 compared with 54.7 during the same month a year ago.
Costello
“After doing this kind of thing for a few years, a little bit of stable growth sounds great to this old professor. It feels like we are in a good economic time,” Arizona State University Professor of Business Dale Rogers said when the report was released. He noted that there is growth across several metrics used to compile the index, including inventory levels, inventory costs and transportation utilization.
“For the first time in the last 20 months — which we believe is a big deal — transportation price growth is also increasing at an increasing rate. Warehousing capacity, warehousing utilization, warehousing prices, and transportation capacity are growing at a decreasing rate, which makes sense as the economy appears to be getting better.”
Every month, researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada-Reno, in conjunction with the Council of Supply Chain Management Professionals, assemble the report. An LMI reading above 50 indicates the logistics sector is expanding; a reading below 50 indicates a contraction.
Rogers
“Job growth remained robust in the U.S. as employers added 353,000 new positions in January — the most in a year. This included large increases from sectors like retail, manufacturing and information technology,” Rogers said. “Due to these improvements, in their January meeting the U.S. Federal Reserve formally changed their stance on interest rates to a more flexible position that would allow for the long-anticipated reductions in the interest rate.
“While rates currently remain between 5.25% and 5.5%, analysts are expecting as many as three rate cuts throughout 2024, and that the first such cut could come as early as the spring. This is good news for the freight markets as high interest rates have been the main factor holding back spending in the upstream portions of supply chains from which larger, bulkier shipments often originate.”
ATA calculates its monthly tonnage index based on surveys from its membership. The index is dominated by contract freight as opposed to spot market freight. In calculating the index, 100 represents the year 2015.
Like ATA’s index, the Cass Freight Index was also down in January by 7.6% year-over-year, and on a month-to-month basis the index declined 3.5%, indicating the freight industry is still in a recession.
January’s shipment reading was at 1.039, and it follows annual declines of 9.5%, 8.9% and 7.2%, for October, November and December, respectively. Cass said the index is well below the August 2022 reading of 1.278, which was the highest level for shipments since May 2018. The Cass index pointed to January’s challenging weather in parts of the country and the usual drop-off after the holiday shopping rush as reasons for the decline.
Denoyer
Still, Tim Denoyer, the report’s author and ACT Research vice president and senior analyst, said it’s possible the worst of the freight recession may be over and 2024 is looking stronger.
“Despite the harsh weather impact, the January decline was in line with normal seasonality. Freight transportation is, of course, an outdoor sport, and it’s tough to say with precision if this January was worse than most, but if so, the underlying trend in freight improved in January,” he wrote. “It’s been two years since the first annual decline of this freight recession and with destocking playing out and goods consumption rising, the downturn is likely nearing its end. While trucking demand remains soft overall, rising import and intermodal trends are key leading indicators of a recovery in trucking this year. Global ocean shipping disruptions will likely add to U.S. freight movements in 2024 as shippers seek to buffer safety stocks. The U.S. economy also continues to provide upside surprises, and far from heading into a recession, the main concern is the economy running too hot right now, with inflation concerns recently returning to the forefront.”
Cass says its index includes all domestic freight modes and is derived from 36 million invoices and $38 billion in spending processed by Cass annually on behalf of its client base of hundreds of large shippers.
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