May Truck Tonnage Rises 3.3%

This story appears in the July 7 print edition of Transport Topics.

U.S. truck tonnage grew by 3.3% in May — the seventh straight monthly increase — according to a preliminary report from American Trucking Associations. The group said business was expanding slowly, but that high fuel prices and a weak economy remained threats to the freight transportation industry.

ATA said the seasonally adjusted index rose to 114.8 from 111.2 last May. At the same time, the April index was revised up to 114.2 from 114, compared with 111.8 in April 2007.

Bob Costello, ATA’s chief economist who oversees the tonnage survey, said trucking’s current improvement is based on easy comparisons.

“Year-over-year comparisons continue to reflect the weakness of 2007 rather than robust growth in 2008,” he said in a statement accompanying the June 26 report.

A TransCore executive said his company’s freight-matching service continues to show a tightening in the truckload spot market, while several fleet managers also spoke of recent “upticks” and “pickups” in business.

Reports on the economy at large, however, showed automobile sales plunging in June, construction spending dipping further in May, intermodal rail traffic falling substantially because of flooding and gross domestic product growth stuck in the 1% range.

“We’re seeing some very positive signs in the marketplace, with pickups in business levels,” said John White, the new president of truckload carrier U.S. Xpress Inc., the largest unit of U.S. Xpress Enterprises.

“The spot market is up, as is general business for us, but when I hear about the bad economy on the news at night, it sounds schizophrenic,” White said in an interview.

“Business is coming back, and our phones are ringing,” said John Craig, who handles sales and marketing for Craig Transportation, Perrysburg, Ohio.

“But, mainly with fuel, we’re facing some variables we’ve never really experienced. In general, our business gets better as the year goes on, but I don’t know if that trend will continue this year,” Craig said.

Costello also said petroleum prices cause trouble for trucking companies on two fronts.

“The industry is significantly impacted, both directly through high diesel prices and indirectly, as consumers have less money to spend on truck-transported goods,” he said.

In general economic news, automobile manufacturers reported a poor June, with U.S. sales down 18% from the same month in 2007.

The Commerce Department also said construction spending dipped 0.4% in May, more than reversing April’s gain of 0.1%.

Commerce also revised its final estimate for first-quarter growth in gross domestic product to 1% a year, up from 0.9%.

The Association of American Railroads said intermodal traffic fell 5.6% for the week ended June 21, mainly related to transport difficulties from flooding in the Midwest.

However, there was also news of growth. Manufacturing expanded in June for the first time in five months, said the Institute for Supply Management.

Sales of existing homes rose in May after a very poor April, a real estate trade group said.

Federal departments also said surface transportation for the international trade of goods within North America reached a record in April, and consumer spending rose by 0.8% in May.

David Schrader, senior vice president at TransCore’s 3sixty Freight Match, said loads posted on his service rose 36%, comparing the month just ended with June 2007.

“Year-over-year, postings have been getting better since October, but there are headwinds due to economic uncertainty,” said Schrader, who also noted that the supply of trucks available for hire is declining.

“We’re a subscription-based business, and small fleets are going out of business and owner-operators are parking their trucks,” he said.

For CRST International, its flatbed division is doing very well and its dry-van business has also shown some life, said David Rusch, president of the company’s carrier group. Rusch said the carrier is hauling a lot of domestic steel and knows of competitors transporting metal for export, as well.

He also expects building materials to be on the move soon, as Midwestern cities and towns — including his own Cedar Rapids — order supplies to rebuild in the aftermath of the June flooding.

“Sheetrock is moving, and we hadn’t seen that in a while,” he said.

Although glad to see some improvement, Rusch was careful to emphasize that the industry has not entered an environment of broad-based prosperity.

“In our dry-van business, this is the first sign of improvement we’ve seen in nine months. This downturn started in July 2006, so we’re two years into this and only now seeing a little bit of light at the end of the tunnel.

“We’re not even close to our utilization rates in 2004 and ’05,” Rusch said, adding that CRST is still profitable, but less so.

“Since 2006, we’ve given back six full points of operating ratio,” he said. A company’s operating ratio measures expenses as a percentage of revenue.

ATA’s Costello said GDP has not fallen into contraction, but he expects the rest of this year will be similar to the first quarter, with total annual growth of about 1%.

With a recession requiring actual decline in GDP, Costello said, “This may be the worst ‘nonrecession’ we’ve ever had.”