January Truck Tonnage Jumps 5.7%

This story appears in the March 1 print edition of Transport Topics.

January truck tonnage rose 5.7%, the biggest year-over-year increase in five years and solid evidence of a recovery in the industry and the U.S. economy, American Trucking Associations reported last week.

The increase in ATA’s seasonally adjusted tonnage index was the biggest year-to-year gain since January 2005 and was the second increase in a row after 14 consecutive months of setbacks.

The seasonally adjusted index hit its highest point since September 2008, ATA said in a Feb. 24 report that also noted a month-to-month increase of 3.1% from December to January.

Comments by fleet executives in recent days reinforced the positive trend. Growth is starting to appear even in the recession-ravaged flatbed sector, whose freight volume fell 20% last year but rose in December for the first time since August 2007, according to ATA.

“We generally feel better about the business,” Steven Williams, CEO of flatbed carrier Maverick USA, Little Rock, Ark., told Transport Topics.

“There are certain segments of the industry, such as steel, that are fairly robust,” Williams said. “There is a shortage of equipment in steel country.”

The overall economy is improving at the same time that capacity is being taken out of the industry, he said, either by operating carriers’ cutbacks or through fleet failures.

John Smith, CEO of CRST International, Cedar Rapids, Iowa, told TT that business “continues to pick up on a year-over-year basis. We have seen double-digit improvements in productivity — miles per tractor per week over last year.”

“We are getting close to where we were in 2006,” Smith said, describing that as a normal year. “Things are really up in both our regular van operations and our flatbed operations.”

Other carriers speaking at investor meetings last month reported year-to-year growth during January, including a 17% increase at Landstar System Inc., Jacksonville, Fla.

ATA Chief Economist Bob Costello said the index and the fleet executives’ reports show a recovery, both in the industry and the economy.

“While I don’t expect tonnage to continue growing as robustly as it did in January, the industry is finally moving in the right direction,” Costello said. “Although there are still risks that could throw the rebound off-track, the likelihood of that happening continues to diminish.”

The improvement in the supply-and-demand balance hasn’t yet helped all flatbed segments, Williams said, noting that building products remain “extremely slow” because of the stagnant housing market.

Further evidence of housing troubles popped up last week. The Commerce Department reported that new home sales fell to a record low and housing prices also declined.

Furthermore, the Conference Board said consumer confidence slumped to its lowest level in 10 years, and the Labor Department said both new and continuing unemployment claims rose.

Although overall orders for durable goods — products lasting more than three years — increased, with aircraft and other transport products excluded, durable goods orders declined 0.6%.

“Going forward, manufacturers will be challenged by weak demand for big-ticket items by businesses and consumers,” David Huether, chief economist for the National Association of Manufacturers, said in a statement. Still, inventory restocking should be a temporary support for manufacturing output in the near term.

Despite the latest batch of reports, the positive freight trend is expected to continue and even gain strength, several economic analysts said in their reports.

Analyst Christopher Ceraso of Credit Suisse First Boston Companies now projects freight will rise 2.1% this year, more than the previous 1% estimate. The year-over-year growth should peak at around 5% in June, he said in his report, fueled by exports, nonresidential investment, inventory restocking and the federal stimulus plan.

“Expect tonnage to gradually improve as the economy strengthens and inventories are built,” said Deutsche Bank analyst Justin Yagerman, who noted in a Feb. 25 report that ATA’s index now has risen 10% since hitting an eight-year low in April.

A truckload freight index published by Morgan Stanley & Co. rose in the first half of February to levels last reached in early 2006, analyst William Greene said in a Feb. 19 report. He said part of the reason for that change could have been weather-related as nationwide demand picked up, but the number of available trucks was trimmed by blizzards in the eastern United States.

ATA’s advance seasonally adjusted index rose to 110.4 in January, while the December 2009 index was adjusted to 107 from 108.4 in annual data, the federation said. Without seasonal adjustment, the index fell 3.3% in January to 99.5.

After its revision of the seasonally adjusted index for the past five years, ATA said actual tonnage volume declined 8.7% for 2009 rather than 8.3%. Both numbers were the worst performance for the index since 1982, another recession year.