Sept. Tonnage Drops 2.3%; No Quick Rebound Seen
By Daniel P. Bearth, Staff Writer
This story appears in the Nov. 5 print edition of Transport Topics.
Truck tonnage declined 2.3% in September and analysts said fleets face a protracted period of softness in freight demand as new economic data provided few signs of an upturn in business activity.
Tonnage hauled has been in decline for more than a year and the number of loads transported is flat, even though the economy overall has continued to expand slowly.
The seasonally adjusted tonnage index rose to 111.6 in September from 110 in August, according to an Oct. 25 preliminary report from American Trucking Associations. In September 2006, the index stood at 114.2. The index compares business activity to a base level of 100 points, which represents 2000’s tonnage.
Tonnage for the month and year-to-date remain well be-low 2006 levels, according to the survey of ATA-member for-hire carriers.
“The long-term outlook is still very positive,” ATA Chief Economist Bob Costello said. “But for the next six to nine months, it’s going to continue to be tough.”
The Commerce Department said Oct. 31 that the U.S. economy grew at a 3.9% annual rate during the third quarter, more than the consensus estimate. Some economists have predicted a much slower rate of expansion in gross domestic product in the fourth quarter.
The main reason for weakness in truck tonnage continues to be a decline in home sales, which has reduced demand for building materials, home furnishings and appliances.
New home sales dropped 8.3% in August to a seasonally adjusted annual rate of 795,000 homes, the slowest pace since June 2000, according to Hanley Wood Market Intelligence.
Sales of existing homes were down 12.8% and inventories are at an 18-year high, Hanley Wood reported.
To ease concern about the effect of a housing downturn, the Federal Reserve lowered its target for short-term interest rates Oct. 31 by a quarter-point to 4.5%. The move followed the Fed’s half-point reduction in September.
“Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance,” the Fed said in a statement. “However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.”
Building contractors expect the credit crunch to put a damper on new construction projects.
“We’re predicting downturns in the previously resilient multifamily and commercial segments, as well as continued weakness in single-family home construction,” said Robert Murray, vice president of economic affairs for McGraw-Hill Construction, who spoke at a construction outlook conference on Oct. 25 in Washington.
Manufacturing also appears to be slowing.
Durable goods orders fell 1.7% in September and are off 6.6% from September 2006. Excluding transportation equipment, though, new orders actually increased by 0.3%. More goods are being ex-ported because foreign currencies have gained in value against the dollar, which makes U.S.-made products more affordable (see story, p. 10).
The Institute for Supply Management’s factory index, seen as a signal of the direction of manufacturing activity, fell to 50.9 in October — the lowest in seven months — from 52 in September. Readings greater than 50 indicate expansion.
ATA’s Costello said that while truck tonnage is down, shipments show no change in the number of loads carried in the first eight months of 2007 compared with the same period a year ago.
Tonnage is down more than shipments because the decline in housing has reduced demand for services to haul loads that are typically heavier than other kinds of freight.
David Schrader, vice president of freight business services for TransCore Inc., a major load-matching service, said he detects no evidence in the truckload spot market that the operating environment is changing.
“We’ve seen a significant slowing of freight being posted to our marketplace,” Schrader said.
“The decline in freight availability has caused a significant shift from the extreme capacity tightness in 2005 to a relative abundance of capacity today,” he said.
TransCore’s freight index, which measures the number of loads and trucks posted compared with a base of 100 in August 1996, was 566 in August, down 30% from the same month in 2006 and well below a reading of 1,006 in August 2005.
Some of the weakness in the freight market, Schrader said, is a function of equipment type and lane and is “not impacting all parties to the same degree.”
The lack of volume shipped has also contributed to a sharp drop in freight rates, said Joel McGinley, an executive consultant with The Internet Truckstop, which has been tracking spot market freight trends since January 2005.
Average truckload rates in September were $1.52 a mile for dry van, $1.72 a mile for refrigerated and $1.61 for flatbed. Two years ago, the average rates were $1.73 for dry van, $2.06 for reefer and $1.86 for flatbed.
McGinley said he expects freight demand to remain weak for some time. “We do not see any significant rebound until the spring of 2009,” he said.
This story appears in the Nov. 5 print edition of Transport Topics.
Truck tonnage declined 2.3% in September and analysts said fleets face a protracted period of softness in freight demand as new economic data provided few signs of an upturn in business activity.
Tonnage hauled has been in decline for more than a year and the number of loads transported is flat, even though the economy overall has continued to expand slowly.
The seasonally adjusted tonnage index rose to 111.6 in September from 110 in August, according to an Oct. 25 preliminary report from American Trucking Associations. In September 2006, the index stood at 114.2. The index compares business activity to a base level of 100 points, which represents 2000’s tonnage.
Tonnage for the month and year-to-date remain well be-low 2006 levels, according to the survey of ATA-member for-hire carriers.
“The long-term outlook is still very positive,” ATA Chief Economist Bob Costello said. “But for the next six to nine months, it’s going to continue to be tough.”
The Commerce Department said Oct. 31 that the U.S. economy grew at a 3.9% annual rate during the third quarter, more than the consensus estimate. Some economists have predicted a much slower rate of expansion in gross domestic product in the fourth quarter.
The main reason for weakness in truck tonnage continues to be a decline in home sales, which has reduced demand for building materials, home furnishings and appliances.
New home sales dropped 8.3% in August to a seasonally adjusted annual rate of 795,000 homes, the slowest pace since June 2000, according to Hanley Wood Market Intelligence.
Sales of existing homes were down 12.8% and inventories are at an 18-year high, Hanley Wood reported.
To ease concern about the effect of a housing downturn, the Federal Reserve lowered its target for short-term interest rates Oct. 31 by a quarter-point to 4.5%. The move followed the Fed’s half-point reduction in September.
“Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance,” the Fed said in a statement. “However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.”
Building contractors expect the credit crunch to put a damper on new construction projects.
“We’re predicting downturns in the previously resilient multifamily and commercial segments, as well as continued weakness in single-family home construction,” said Robert Murray, vice president of economic affairs for McGraw-Hill Construction, who spoke at a construction outlook conference on Oct. 25 in Washington.
Manufacturing also appears to be slowing.
Durable goods orders fell 1.7% in September and are off 6.6% from September 2006. Excluding transportation equipment, though, new orders actually increased by 0.3%. More goods are being ex-ported because foreign currencies have gained in value against the dollar, which makes U.S.-made products more affordable (see story, p. 10).
The Institute for Supply Management’s factory index, seen as a signal of the direction of manufacturing activity, fell to 50.9 in October — the lowest in seven months — from 52 in September. Readings greater than 50 indicate expansion.
ATA’s Costello said that while truck tonnage is down, shipments show no change in the number of loads carried in the first eight months of 2007 compared with the same period a year ago.
Tonnage is down more than shipments because the decline in housing has reduced demand for services to haul loads that are typically heavier than other kinds of freight.
David Schrader, vice president of freight business services for TransCore Inc., a major load-matching service, said he detects no evidence in the truckload spot market that the operating environment is changing.
“We’ve seen a significant slowing of freight being posted to our marketplace,” Schrader said.
“The decline in freight availability has caused a significant shift from the extreme capacity tightness in 2005 to a relative abundance of capacity today,” he said.
TransCore’s freight index, which measures the number of loads and trucks posted compared with a base of 100 in August 1996, was 566 in August, down 30% from the same month in 2006 and well below a reading of 1,006 in August 2005.
Some of the weakness in the freight market, Schrader said, is a function of equipment type and lane and is “not impacting all parties to the same degree.”
The lack of volume shipped has also contributed to a sharp drop in freight rates, said Joel McGinley, an executive consultant with The Internet Truckstop, which has been tracking spot market freight trends since January 2005.
Average truckload rates in September were $1.52 a mile for dry van, $1.72 a mile for refrigerated and $1.61 for flatbed. Two years ago, the average rates were $1.73 for dry van, $2.06 for reefer and $1.86 for flatbed.
McGinley said he expects freight demand to remain weak for some time. “We do not see any significant rebound until the spring of 2009,” he said.
