May Truck Freight Up 4.1%

This story appears in the June 25 print edition of Transport Topics.

Truck tonnage continued to grow last month, rising 4.1% from a year earlier despite mounting caution about the U.S. economy’s strength, American Trucking Associations reported.

ATA said its index for May stood at 117.8, extending a streak of year-over-year freight growth to a 30th consecutive month.

The increases that began in December 2009 are expected to continue at a similar pace in the months ahead, said Bob Costello, ATA’s chief economist, in the June 19 report. Tonnage has gained 3.8% over the first five months of 2012 and is expected to rise between 3% and 3.9% for the full year, he said.

“The good news is that the decrease in fuel prices will help support retail sales going forward, which is a big part of truck tonnage,” Costello said.

On a sequential basis, Costello said the 0.7% decline in May from April was “disappointing.” It was the second consecutive sequential decline and the third time in five months that tonnage dropped on a month-to-month basis.

“The drops in tonnage are reflective of the broader economy, which has slowed,” Costello said.

He expressed concern about several issues, noting that businesses continue to sit on cash instead of making capital investments or hiring more workers. Costello also cited uncertainty about Europe’s financial woes and U.S. tax policy as holding back business from moves that would increase freight growth.

Sketching what he termed “a muddle-through economy,” James Meil, chief economist at industry supplier Eaton Corp., had similar assessments of the economy and freight markets.

“Part of the muddle-through process is that the headlines are a bit scary,” Meil said. “They shake confidence going forward.”

Meil specifically cited European problems, China’s slowing economic growth and what he termed an “array of actions that were triggered by past Congresses” as factors that are causing confidence to waver.

“There will be growth,” he said. “We think we will avoid a recession, but [the pace] probably will leave most businesses and those of us in the trucking industry unhappy that it was not stronger.”

U.S. issues include potential spending cuts tied to an earlier budget agreement, the prospect that payroll tax cuts will expire and the potential termination of income tax cuts dating to President George W. Bush’s administration.

“An area that might be struggling a little bit is consumer and retail sales, which are very important for transportation,” Meil said. “Part of the problem is the job market and the employment situation that was pretty good in the first quarter seems to have slowed down in April and May.”

On the other hand, he described manufacturing as a “good-news sector” that generates substantial amounts of freight. Falling diesel prices also are helping manufacturers and fleets alike, Meil said, as recent fears that diesel prices would reach $4.50 a gallon have been allayed.

The latest round of economic statistics supported the “muddled” picture.

Retail sales fell 0.2% in May, ending a streak of 21 consecutive months of growth that helped to buoy the economy, the Commerce Department reported June 13.

On a positive note, the index of leading economic indicators, measuring expected economic activity over the next three to six months, rose 0.3%, the Conference Board reported on June 21.

“Transportation companies generally noted a moderately expanding economy,” said a June 14 report from Justin Yagerman, a Deutsche Bank analyst, following an investor conference sponsored by the bank. “While European uncertainty has left both investors and shippers more cautious, transportation companies have not seen any deterioration in shipping volumes.”

He also noted that Con-way Inc. and other carriers said at the conference that freight volumes have risen modestly in the second quarter on a year-over-year basis.

Another ATA measure of trucking activity, the non-seasonally-adjusted index, rose 7.1% on a year-to-year basis to 124.5. That index, measuring actual truck shipments last month, climbed 6.5% on a month-to-month basis, far outpacing the 1.6% average sequential change over the past 10 years.

Elsewhere, TransCore DAT, Portland, Ore., said that load board activity continues to be brisk.

TransCore said on June 13 its North American freight index rose 1.7% in May, setting a record for any single month. The increase year-over-year was 25% in May, measured in loads made available by shippers, brokers and third-party logistics providers.

Other recent freight indexes also have pointed in a positive direction.

The Cass Freight Index, measuring trucking and other freight moved, rose 2.2% in May year-over-year, based on freight bills paid by the St. Louis bank that created the index.

The Ceridian-UCLA index, based on diesel purchases using Comdata fuel cards, rose 1.5% in May.