November Tonnage Falls 1.8%
By Rip Watson, Senior Reporter
This story appears in the Jan. 5 print edition of Transport Topics.
November truck tonnage declined 1.8% on a seasonally adjusted basis from year-earlier levels and 15.4% on an unadjusted basis, delivering the latest evidence that the economic downturn is putting ever more pressure on fleets.
American Trucking Associations’ seasonally adjusted index stood at 110.7, as year-to-year tonnage fell for the second straight month after rising for 11 months before October. The unadjusted tonnage number of 101.3 was the worst since November 2003.
On a sequential basis, the seasonally adjusted index was a slight improvement from 109.3 in October, which reflected the worst freight environment in five years (click here for previous Premium Content story).
“Don’t let November’s increase in the seasonally adjusted index fool you,” said Bob Costello, ATA’s chief economist. “Tonnage was worse, much worse, in November than in October — at least from the carriers’ perspective, which is highlighted in the huge 15.4% contraction.”
Costello explained the difference between the seasonally adjusted rise in November and the decline in the unadjusted number by saying the adjusted number reflects holidays such as Thanksgiving and varying numbers of working days.
That adjustment permits a comparison of monthly tonnage on an “apples-to-apples” basis, he said.
The recession that has hurt all transport modes has hit less-than-truckload fleets especially hard, as evidenced by the Dec. 23 profit warning by Old Dominion Freight Line on the heels of similar weakness reported by other LTL carriers. The downturn also prompted the nation’s two busiest ports — Los Angeles and Long Beach, Calif. — to drop Saturday operations as container traffic falls.
The latest economic indicators gave no sign of a pickup.
Sales of new and existing homes both fell 7.6% in November, the worst performance in two decades. The Commerce Department confirmed the recessionary performance in the third quarter, saying its final calculation of gross domestic product showed a 0.5% decline, the same percentage as the preliminary number.
“The primary cause of our revision in guidance is weakness in tonnage, as well as the continuing competitive pricing environment,” said Earl Congdon, Old Dominion’s chairman, noting that tonnage weakened during the third quarter and into October. “The trend accelerated throughout the fourth quarter and has been exacerbated in December by harsh winter weather.”
The Dec. 23 announcement by Old Dominion, which had the best operating ratio of any LTL carrier through the first nine months of 2008, said a 6% to 7% year-over-year fourth-quarter tonnage drop is expected, and profit will be about half of the 2007-period results.
Old Dominion’s announcement was the latest in a series of distress signals from LTL carriers.
FedEx Freight said on Dec. 18 operating profit dropped 59% for its latest quarter, and the operating ratio was the worst in eight years.
Con-way Inc., Arkansas Best Corp. and YRC Worldwide all said recently that tonnage had declined significantly during the most recent quarter.
“Less-than-truckload trends have deteriorated sequentially through the fourth quarter,” Jon Langenfeld, an analyst for Robert W. Baird & Co., said in an investor note, observing that the year-to-year quarterly decline is the first in Old Dominion’s history as a publicly traded company. “Results reflect that industry trends have caught up to Old Dominion Freight Line.”
December trends as seen by more recent market condition reports also showed weakness.
Internet Truckstop’s weekly index of demand remained below November levels though it improved in the week ended Dec. 20. The newsletter said the weekly boost was a possible sign of a last-minute push by shippers to move inventory to stores before the holidays, a signal of reduced capacity, or a combination of the two factors.
“There was a distinct slowdown in the October-November time frame,” said David Schrader, senior vice president of TransCore, who also said activity appeared to stabilize in late December.
Load postings at TransCore fell 55% in December 2008, compared with December 2007, slightly worse than the 49% drop reported in November 2008 from the prior November.
Associate News Editor Jonathan S. Reiskin contributed to this story.
