January Truck Tonnage Surges 8%

This story appears in the Feb. 28 print edition of Transport Topics.

Truck tonnage surged 8% in January from a year earlier, helped by continued growth in the manufacturing sector, pushing American Trucking Associations’ tonnage index to its highest level since January 2008.

The advance seasonally adjusted index reached 117.1, improving for the 14th consecutive month and rising at the fastest pace since April, ATA announced Feb. 23. On a sequential basis, tonnage climbed 3.8% in January over December.

“Many fleets told us that freight was solid in January, although operations were a challenge due to the winter storms that hit large parts of the country,” ATA’s chief economist, Bob Costello, said.

The index uses the freight volumes recorded in 2000 as the base level of 100. The non-seasonally adjusted index fell 2.9% in January from December.

ATA’s tonnage report last week coincided with other economic indicators that further signaled a pickup in demand.

One of those indicators is the level of orders for durable goods — products expected to last at least three years —— which rose 2.7% last month, the Labor Department reported Feb. 24.

In addition, consumer confidence measured by the Conference Board rose to 70.4 this month, the highest level since February 2008. At the same time, initial jobless claims fell by 22,000 for the week ended Feb. 19, and existing home sales climbed at the fastest rate in eight months during January.

Judy McReynolds, CEO of Arkansas Best Corp., said the steady increase in the Institute for Supply Management factory index published on Feb. 1 “bodes well for our businesses associated with manufacturing” because there is a strong correlation between higher index readings and tonnage growth.

She spoke at the BB&T Capital Markets Transportation Conference on Feb. 17 in Coral Gables, Fla., where she reported that the company’s ABF Freight System unit has achieved a 13% tonnage increase so far in 2011.

ATA’s Costello said he was “very pleased with January’s robust gain” and noted that results last month show that the U.S. economy “is growing at a good clip early in 2011,” raising expectations for a solid first half of the year.

However, he sounded a cautionary note as crude oil prices climbed above $100 a barrel last week for the first time since 2008 as political unrest continued in petroleum producing countries, including Libya.

“At this point, the biggest threat is the recent run-up in oil prices, which could dampen consumer spending,” Costello said.

The January tonnage increase exceeded typical seasonal changes and followed the 5.7% growth pace in the tonnage index last year.

“There is a sense that demand is reasonably strong,” BB&T Capital Markets analyst Thom Albrecht said in a Feb. 22 note following his firm’s investor conference. “Severe winter weather has obscured the true state of things as freight networks and truck positioning remain out of whack.”

He also noted other signs of increased activity.

Equipment rentals have risen significantly, he said, based on comments from two leasing firms, and customers are seeking more longer-term leases.

Parts-and-service sales, as well as meals sold by a truck-stop operator, also are signs of an improving freight market, he noted.

Other freight company executives speaking at the BB&T Conference also stressed the growth in demand.

“We are turning down 1,000 loads a week,” said Steve Gordon, chief operating officer at Gordon Trucking Inc. “At this time last year, it was 400.”

Heartland Express Inc. CEO Michael Gerdin said on Feb. 16 that “we think it is going to be a positive year for trucking. We are just glad it is not 2009 and 2010 again. This is shaping up to be a much better year.”

“There is underlying demand,” said Rick O’Dell, CEO of Saia Inc., who noted that terminals that reopened after severe storms earlier this month processed far more freight bills than they would on a normal day.

Don Cochran, CEO of Universal Truckload Services Inc., told TT that freight delays resulting from winter storms simply postponed shipments and didn’t dampen underlying demand.

Spot freight markets also are gaining strength, said John Wiehoff, CEO of C.H. Robinson Worldwide Inc.

One sign of that trend was TransCore’s load index, which rose 56% last month above the same month of 2010. Loads also were increasing sequentially this month, according to statements by the load matching service on its website.

Port activity also is picking up.

Imports through California ports rose 12.5% last month and are expected to climb 6% in the first half of 2011, according to a port forecasting report from the National Retail Federation and Hackett Associates.