January Truck Tonnage Grows 5.3%

By Dan Leone, Staff Reporter

This story appears in the March 3 print edition of Transport Topics.

Truck tonnage in January posted its biggest gain since the beginning of 2005, climbing 5.3% above year-ago levels and marking the third consecutive increase for the monthly index, American Trucking Associations reported Feb. 26.

However, the encouraging report on tonnage coincided with a wave of bad news on the economy, and ATA’s chief economist said that while the January numbers were good for the industry, it was too early to tell whether tonnage is trending toward a longer-term recovery.

“The economy is either in a mild recession or on the brink of one, and we are hearing anecdotal reports that freight volumes slowed in February,” ATA’s Bob Costello said. “I anticipate that truck tonnage will recover before the general economy, [but] I think that based on what we know today, it’s too early to say we’re past the bottom” of the weak freight market, he added.

Other trucking analysts interpreted the data in ATA’s latest tonnage report as a sign the industry could be close to hitting the bottom of the soft freight market.

Last week, prices for diesel fuel and crude oil surged to record levels, amid reports of a weakening economy, rising inflation, falling orders for durable goods and continuing troubles in the distressed housing market.

In its preliminary tonnage-index report for January, ATA said tonnage hauled by its member carriers rose to 117.3 — the highest level in more than two years — from a revised 114.5 in December that was lower than initially reported.

The index is based on a monthly survey of ATA members and compares current tonnage levels to a baseline reading of 100 points in the year 2000.

“Tonnage is finding a bottom,” Thom Albrecht, a Glenn-Allen, Va.-based analyst with Stephens Inc., wrote in a note to investors Feb. 27. 

However, Albrecht said it could still be some time before truckers see higher profits, as “historically, truck profits and a more robust feeling in freight volumes lag by three to four quarters after tonnage turns positive.”

Albrecht said he does not see a full recovery for motor carriers until sometime in 2009. Justin Yagerman, an analyst with Wachovia Securities in New York, also said that the industry was close to hitting the bottom of the freight market.

A day after ATA issued its report, Yagerman wrote that he was “optimistic that freight is bottoming out,” though he added that truckers likely will be grappling with “lackluster” freight volumes in the first half of 2008.

Meanwhile, in spite of rising inflation, the Federal Reserve appears poised to make further interest rate cuts, Bloomberg News reported.

“The economic situation has become distinctly less favorable,” Fed Chairman Ben Bernanke told Congress Feb. 27. Fed officials “will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.”

The Fed has cut a key interest rate 2.25 percentage points since September, slashing its target federal funds rate to 3%.

Inflation, however, continued to climb in January. The Labor Department’s “core” consumer price index, which excludes food and energy costs, rose 0.3%. Core wholesale inflation, as measured by the Labor Department’s producer price index, rose 0.4%, the biggest gain in almost a year.

Also last week, the Commerce Department reported that the U.S. gross domestic product grew at an annual rate of 0.6% in the fourth quarter.

The fourth-quarter GDP slump was a sharp drop from the previous quarter, when the economy expanded at a 4.9% annual rate, the largest gain in four years, according to Commerce.
Another Commerce Department report last week showed that one source of freight for truckers could be poised for a downturn. 

Durable goods orders plunged 5.3% in January, following a 4.4% gain in December that was smaller than originally reported, Commerce said Feb. 27.

Durable goods manufacturing creates components and finished products that provide freight for motor carriers.

Other data indicated the housing market, which provides freight for truckers in the form of building materials and new appliances, could still be waiting to hit bottom.

January housing starts inched up 0.8%, but remained near the 17-year low recorded in December, the Commerce Department said. Building permits, an indicator of future construction, fell 3%.

In addition, sales of existing homes sank to the lowest level in nine years in January, falling 0.4% to an annual rate of 4.89 million from a revised 4.91 million in December, according to the National Association of Realtors.

Hanley Wood, a Costa Mesa, Calif., research firm that tracks developments in the housing market, said in a Feb. 22 note that it still wasn’t possible to tell “whether the [housing] market is showing any signs of stabilization.”