January Tonnage Gains 3.6%, Reports Show Economy’s Growth

This story appears in the March 5 print edition of Transport Topics.

Truck tonnage rose 3.6% in January, extending a string of year-over-year growth into a fourth year and buoying optimism that steady improvement in the consumer and manufacturing sectors will continue to lift the freight industry.

The advance seasonally adjusted index published by American Trucking Associations has climbed on a year-to-year basis in every month since December 2010 and reached 119.4, the trade group announced on Feb. 28.

On a month-to-month basis, however, the index receded 4% in January from December, when the index reached an all-time record of 124.4. While the index dropped on a sequential basis, January still was the third-highest month ever, topped only by December and the 121.5 recorded in January 2005.

The trade group’s announcement coincided last week with several economic indicators that signaled an acceleration in economic growth, including higher consumer confidence, manufacturing, gross domestic product and Federal Reserve reports.

“You can’t say it is one thing” helping tonnage, Bob Costello, chief economist at ATA told Transport Topics. “It is a lot of things, including manufacturing and retail sales.”

“I’m still optimistic about truck tonnage, going forward. In fact, while many fleets said January was normal, they are also saying that February has been pretty good so far,” he said.

Fleets, brokers and shippers speaking last month at an investor meeting said demand continued to grow at a modest pace in early 2012, helping carriers that can take advantage of the balance between supply and demand to raise rates (2-27, p. 6).

The ATA report also included the not seasonally adjusted index, which counts tonnage actually hauled. That index stood at 112.1 in January, or 3.5% below December, but 6% ahead of January 2011.

Meanwhile, the Conference Board on Feb. 28 said its index of consumer confidence reached 70.8, an increase of 9.3 percentage points, to the highest level since February 2011.

“Consumers are considerably less pessimistic about current business and labor market conditions than they were in January,” said Lynn Franco, director of the group’s Consumer Research Center, in a statement. “Despite further increases in gas prices, they are more optimistic about the short-term outlook for the economy, job prospects and their financial situation.”

Other economic reports also were favorable.

“Manufacturing continued to expand at a steady pace across the nation,” the Federal Reserve said in its Beige Book business survey, citing higher capital spending in the automotive industry.

“Reports of consumer spending were generally positive, except for sales of seasonal items, and the sales outlook for the near future was mostly optimistic,” the Fed report also said, while noting improvement in the housing market in some areas such as Cleveland and Chicago.

Related to manufacturing, the Institute for Supply Management-Chicago Inc. said its index based on a survey of purchasing managers in the Chicago area hit a 10-month high of 64, increasing 3.8 percentage points.

“We’re continuing to see moderate economic expansion driven by an improvement in the labor market,” Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York, told Bloomberg News.

While the pattern was strong in the February purchasing managers’ report, the Commerce Department’s latest report on orders for durable goods — those meant to last three years or more — created a mixed picture.

The report on durable goods orders in January showed a 4% decline, the Commerce Department reported on Feb. 27. It was the largest drop in three years. Durable goods orders often fluctuate widely, because of the irregular flow of large airplane orders.

Also on the positive side, the Commerce Department on Feb. 28 revised fourth-quarter gross domestic product upward to a 3% annual growth rate from 2.8%, the fastest pace since the second quarter of 2010.

Reports from industry analysts Benjamin Hartford at Robert W. Baird & Co. and Justin Yagerman at Deutsche Bank last week reinforced indications that freight volume and demand are improving steadily.

Yagerman’s report said demand would strengthen this month, “given solid retail sales (up 5.5% year-over-year in January) coupled with low inventories, growing consumer confidence and stable income levels.”

“March volumes are expected to be solid, positively influenced by five Fridays and an earlier Easter,” Hartford said, noting that volume is expected to continue rising in the 2% to 3% range, as measured by the firm’s freight index.

Hartford also said “rising diesel prices [are] a modest near-term head wind to asset-based providers given lag in fuel-surcharge recovery” with diesel topping $4 per gallon last week and climbing nearly 20 cents over three weeks.

ATA also announced that the federation recently completed its annual revision of the seasonally adjusted index for freight tonnage. As a result of the revision, the 2011 tonnage growth was pegged at 5.8%, the same rate as in 2010. ATA said earlier that 2011 tonnage increased 5.9%.