January Tonnage Drops 10.8%
This story appears in the March 9 print edition of Transport Topics.
January truck tonnage fell 10.8% below year-ago levels, the fourth consecutive year-over-year decline and another signal the freight recession shows no signs of bottoming out yet, American Trucking Associations said.
The advanced seasonally adjusted index reading was 104.7, the second-lowest reading since October 2002, ATA said. Only December was worse, finishing at a revised 101.7, which represented a year-to-year decline of 12.5%.
On a month-to-month basis, the seasonally adjusted index rose 3% from December to January, following a 7.8% drop from November to December. The non-adjusted index fell 4.4% in January.
“Tonnage will not fall every month, and just because it rises every now and then doesn’t mean the economy is on the mend,” said ATA Chief Economist Bob Costello. “It is still a very tough freight environment and it will get worse before it gets better. Furthermore, tonnage is contracting significantly on a year-over-year basis, which is highlighting the current weakness in the freight environment.”
“Absolute freight demand levels have been relatively stable over the past three months,” Robert W. Baird analyst Jon Langenfeld said in a March 2 investor note. “However, without the typical seasonal uptick that generally occurs in late February and early March, the year-over-year trend is likely to deteriorate. We continue to believe the first quarter will be the worst quarter since deregulation for the transport industry.”
The latest indicators of the U.S. manufacturing sector told a consistent story. Fourth-quarter gross domestic product released by the Commerce Department on Feb. 27 fell 6.2%. The Institute for Supply Management said its February manufacturing index wallowed at 35.8, its fifth consecutive month below 40 on a scale that signals expansion when it tops 50.
The economic stress that faces the entire freight industry was driven home by President Obama during his first visit to Department of Transportation headquarters in Washington (click here for Premium Content story).
“I want to begin with some plain talk,” Obama said on March 3. “The economy’s performance in the last quarter of 2008 was the worst in over 25 years. And, frankly, the first quarter of this year holds out little promise for better returns.”
Other indicators of economic woes included a decline in construction projects and a drop in auto sales announced March 2. U.S. auto sales were the lowest in 27 years, Bloomberg News reported.
Anecdotal reports, including comments by ABF Freight System Inc. and Landstar System Inc., indicate how far freight has fallen so far this year.
“Demand is just very, very soft,” Landstar Chief Executive Officer Henry Gerkens said on a March 2 conference call. “There is too much capacity in the marketplace, and downward pressure on price continues.”
The company’s revenue fell 20% in the first two months of 2009, when freight volumes traditionally are the weakest of the year.
ABF said in a regulatory filing its tonnage per day through mid-February was down 16%, even worse than the 11.5% decline in the fourth quarter, which included steeper declines in November and December.
“Business is really, really bad,” Maverick USA Inc. Chief Executive Officer Steven Williams said on Feb. 24. The downturn started in 2006 “and it’s been a challenge ever since,” he said.
During a Feb. 11-12 investor conference, fleets that commented on early 2009 tonnage trends reported that January was similar to December or declined even further from the end of 2008.
Other measures of recent freight activity were even worse than the decline in truck tonnage.
January carloads on U.S. railroads fell 17%, including even deeper declines in industrial bellwether commodities, according to the Association of American Railroads. Carloads of motor vehicles fell 63%, metals dropped 44% and chemicals slid 18% from the same month of 2008.
Internet Truck Stop’s freight-matching service, which measures demand through an index, sank to 1.43 in January, the lowest level in at least a year and far below 3.63 in that month of 2008, said Joel McGinley, executive consultant. An index number of 7 reflects a balanced supply-demand market. The index was at 12.78 in June last year, when spot freight capacity was scarce.
The economic downturn also was reflected in the March 3 report by the Transportation Department that U.S. surface trade with Canada and Mexico fell 13% in December. The drop was 17% between the United States and Canada and 6% with Mexico. The November decline was 14%.
Consulting firm FTR Associates’ latest freight forecast said tonnage in the first quarter will be even worse than the latest fourth quarter and that volume will bottom out in the second quarter with a year-to-year decline of more than 10%. The Feb. 23 report projected that the second half of the year also will trail 2008.
Senior Reporter Sean McNally contributed to this report.
