March Truck Tonnage Rises 2.7%

Truck tonnage grew in March, but by the smallest year-over-year rate since December 2009, rising at a moderate 2.7% pace that is likely to be followed by similar results in the months ahead, American Trucking Associations said last week.

The advance and not seasonally adjusted index rose to 119.5, the trade association reported on April 24, and gained 3.7% over the first quarter, including 5.5% in February and 3.1% in January. Tonnage last month increased 0.2% over February levels, which was the seventh increase in the past eight months on that basis.

During the past 28 months of consecutive year-over-year increases, tonnage has risen as fast as 10.5% — in December 2011 — which was the fastest pace since 1998. That performance pushed the index to an all-time record of 124.5.

“March tonnage, and the first quarter overall, was reflective of an economy that is growing but growing moderately,” ATA Chief Economist Bob Costello said, cautioning that the industry shouldn’t expect 2012 growth to match the 5.8% pace in both 2010 and 2011.

Tonnage should continue to grow, he said, because the manufacturing sector and household spending remain strong, with a bit of help from an improving housing market.

“Expect tonnage overall this year to be up at a more moderate rate, perhaps less than 3%, which is more in line with normal growth,” Costello said. “Most economic indicators still look good, which will continue to support tonnage going forward.”

Some companies in trucking used similar phrasing to describe the economic environment so far this year. Gregory Swienton, CEO of Ryder System Inc., last week said first-quarter earnings that rose 35% were “better than expected in an economy that is recovering only modestly.”

There could be another reason for the March tonnage slowdown.

“The economy may have gotten a little ahead of itself,” said James Meil, chief economist at Eaton Corp., told TT. “The [economic] numbers were very strong in January and February. This [March] may be the pause that refreshes.”

March tonnage was “very consistent” with economic data such as industrial production, new job creation and auto sales, Meil said.

For example, he said, industrial production dropped 0.2% in March after gaining 1.1% in January and 0.8% in February. Job creation slipped from more than 200,000 in those months to just 120,000 in March.

Part of the reason for the March results, he said, is that some economic activity such as retail sales and car sales were helped in January and February by a winter that was milder than normal in the Midwest and Northeast.

Avondale Partners LLC analyst Donald Broughton agreed.

“There was a pull forward in [trucking] demand this year and no catching up to do in March,” Broughton said. “Last year, the weather was dismal in January and February, and there was a ton of catching up to do in March.”

Last year, ATA’s not seasonally adjusted tonnage index, measuring freight actually hauled, rose 21% from February to March, reflecting that catch-up process. By comparison, the unadjusted index rose 9.1% from February to March this year, finishing at  123.2.

Among the fleets noting that trend was Swift Transportation Co., whose CEO, Jerry Moyes, said on an April 20 conference call that “we did not experience a typical uptick in freight volumes in March. Last March, was abnormally strong, due to pent-up demand.”

Information compiled by load board operator Trans-Core, Beaverton, Ore., showed a year-to-year drop of 6.1% in freight made available through its matching service.

Its April 17 report raised another possible explanation for the slower year-over-year growth in ATA’s index.

TransCore noted that last month was compared to spot market volume that set a record in March 2011 because of an earlier-than-usual surge in early spring demand last year.

“After this March pause, things will straighten out, and we should have a solid, if not spectacular, year,” Meil said, aided by a strengthening construction sector and continued Federal Reserve policy that has pushed interest rates to near zero.

Meil said he’s anticipating manufacturing growth of about 5% and similar improvement in tonnage.

“This really is a good environment for exports, even with European and Asian [economic] weakness” because of the relative weakness in the U.S. dollar, compared with other currencies, he said.

Broughton said he expects “to continue to see solid tonnage growth” in an environment of ever-tightening capacity because of a worsening driver shortage and discipline shown by large carriers that are not adding excessive amounts of new equipment.

Other analysts also predicted strengthening in the months ahead.

Justin Yagerman at Deutsche Bank said freight demand should strengthen in April and May, citing improved retail sales and international import shipment growth at California ports. Inventory restocking also should help, he said in his April 24 report.