Some Analysts See Recovery as ATA Freight Index Gains
By Rip Watson, Senior Reporter
This story appears in the April 7 print edition of Transport Topics.
The February increase in truck tonnage that American Trucking Associations reported late last month — the fourth straight rise — may signal better times ahead for truckers and the U.S. economy, several industry analysts and observers said.
“The worst is behind us,” said Thom Albrecht, a trucking analyst for Stephens Inc. “Trucking tonnage has turned positive, despite the economic gloom and doom. Truckers lead into and out of an economic downturn.”
The refrigerated, tanker and flatbed sectors are relatively strong, compared with the truckload sector, which has been hit harder by the weak economy, Albrecht said.
However, the increase in ATA’s seasonally adjusted monthly tonnage index was announced on March 27 (3-31, p. 4) against the backdrop of yet another round of lackluster economic indicators. The latest manufacturing index from the Institute for Supply Management continued to reflect contraction in that key sector. Weak auto and new home sales, as well as lower factory and durable goods orders, showed continued weakness.
“Although there is a lot of gloom and doom in the economy, especially regarding housing, I don’t think it’s universal,” said David Schrader, vice president of freight business services for TransCore, which operates a freight matching service. “Manufacturing is a bit stronger than expected.”
He said 2.9 million more available loads were posted on Transcore’s load board in the first quarter than during the same period in 2007, signaling that the overall trucking market is stronger than economic indicators suggest.
ISM’s April 1 manufacturing index, though it remained below the 50 level that indicates growth, rose to 48.6 from 48.3 and topped the prediction of 47.5 in a Bloomberg survey of analysts.
The 3.5% February rise in ATA’s widely watched tonnage index followed an increase of 5.3% in January. On a month-to-month basis, the index remained at 117.2 in January and February.
Wachovia analyst Justin Yagerman said in an investor note that he was “optimistic that freight is at, or near, the bottom” of the current cycle because of the recent rise in the ATA index, as well as conversations with carriers.
“Tonnage readings will likely remain volatile in the near term, due to easy year-over-year comparisons,” he said.
“Perhaps we are seeing a repeat of the last recovery,” said Bob Costello, ATA’s chief economist.
Costello said the association’s tonnage index began to rise eight months before the end of the latest recession, which occurred in 2001. If that pattern is followed this year, U.S. economic activity would turn positive in June, because the latest rise in ATA’s index began in November.
Costello forecast the U.S. economy, as measured by gross do-mestic product, would grow at about a 2% annual pace in the second half of 2008, and he said he expects the Commerce Department to report declines of 0.5% in the first quarter and 0.2% in second.
He sounded cautionary notes about the second half of 2008, saying that “there are just too many downside risks at the moment to say definitely that trucking is leading an economic recovery.”
Continued weakening of the U.S. dollar and rising energy costs are major risks, Costello said, as are housing-related troubles in the financial sector that have squeezed credit markets.
On April 2, Federal Reserve Chairman Ben Bernanke told Congress the economy may shrink over the first half of this year and that “a recession is possible.”
Despite the rising tonnage index, Eric Starks, president of FTR Associates, said many fleets continue struggling to get loads.
“The anomaly out there is the ATA index,” said Starks, whose firm publishes its own index of trucking activity moved in Class 8 tractors, which fell 2.3% from February 2007. “When we talk to fleets, their numbers are not consistent with ATA’s index. Fleets are saying volumes are flat to down.”
“In general, the other data that is being shown out there is contradictory to the ATA index,” said Starks, citing the ISM and other indicators.
Among those negative indicators were the 1.3% drop in factory orders announced April 2 and a 1.7% drop in durable goods orders the Commerce Department reported last week. Also, new home sales dived 30% in February.
General Motors Corp., the largest automaker, said sales fell 19%, the most among major automakers, followed by a 14% drop at Ford Motor Co. and a decline of 10% at Toyota Motor Corp.
The lone bright spot in recent economic news came from the U.S. Department of Transportation, which reported that surface trade among the United States, Canada and Mexico jumped 7.4% in January from a year earlier, including a 7.9% rise in the value of export cargo moved by truck.
“The usual suspects that you would think are weak are still weak,” TransCore’s Schrader said, such as demand for flatbeds to move building materials into California’s depressed housing market. Demand for flatbeds in the Midwest to move steel products, primarily for export, has been increasing, as the weak dollar makes U.S. products more competitive in overseas markets, Schrader and Albrecht said.
This story appears in the April 7 print edition of Transport Topics.
The February increase in truck tonnage that American Trucking Associations reported late last month — the fourth straight rise — may signal better times ahead for truckers and the U.S. economy, several industry analysts and observers said.
“The worst is behind us,” said Thom Albrecht, a trucking analyst for Stephens Inc. “Trucking tonnage has turned positive, despite the economic gloom and doom. Truckers lead into and out of an economic downturn.”
The refrigerated, tanker and flatbed sectors are relatively strong, compared with the truckload sector, which has been hit harder by the weak economy, Albrecht said.
However, the increase in ATA’s seasonally adjusted monthly tonnage index was announced on March 27 (3-31, p. 4) against the backdrop of yet another round of lackluster economic indicators. The latest manufacturing index from the Institute for Supply Management continued to reflect contraction in that key sector. Weak auto and new home sales, as well as lower factory and durable goods orders, showed continued weakness.
“Although there is a lot of gloom and doom in the economy, especially regarding housing, I don’t think it’s universal,” said David Schrader, vice president of freight business services for TransCore, which operates a freight matching service. “Manufacturing is a bit stronger than expected.”
He said 2.9 million more available loads were posted on Transcore’s load board in the first quarter than during the same period in 2007, signaling that the overall trucking market is stronger than economic indicators suggest.
ISM’s April 1 manufacturing index, though it remained below the 50 level that indicates growth, rose to 48.6 from 48.3 and topped the prediction of 47.5 in a Bloomberg survey of analysts.
The 3.5% February rise in ATA’s widely watched tonnage index followed an increase of 5.3% in January. On a month-to-month basis, the index remained at 117.2 in January and February.
Wachovia analyst Justin Yagerman said in an investor note that he was “optimistic that freight is at, or near, the bottom” of the current cycle because of the recent rise in the ATA index, as well as conversations with carriers.
“Tonnage readings will likely remain volatile in the near term, due to easy year-over-year comparisons,” he said.
“Perhaps we are seeing a repeat of the last recovery,” said Bob Costello, ATA’s chief economist.
Costello said the association’s tonnage index began to rise eight months before the end of the latest recession, which occurred in 2001. If that pattern is followed this year, U.S. economic activity would turn positive in June, because the latest rise in ATA’s index began in November.
Costello forecast the U.S. economy, as measured by gross do-mestic product, would grow at about a 2% annual pace in the second half of 2008, and he said he expects the Commerce Department to report declines of 0.5% in the first quarter and 0.2% in second.
He sounded cautionary notes about the second half of 2008, saying that “there are just too many downside risks at the moment to say definitely that trucking is leading an economic recovery.”
Continued weakening of the U.S. dollar and rising energy costs are major risks, Costello said, as are housing-related troubles in the financial sector that have squeezed credit markets.
On April 2, Federal Reserve Chairman Ben Bernanke told Congress the economy may shrink over the first half of this year and that “a recession is possible.”
Despite the rising tonnage index, Eric Starks, president of FTR Associates, said many fleets continue struggling to get loads.
“The anomaly out there is the ATA index,” said Starks, whose firm publishes its own index of trucking activity moved in Class 8 tractors, which fell 2.3% from February 2007. “When we talk to fleets, their numbers are not consistent with ATA’s index. Fleets are saying volumes are flat to down.”
“In general, the other data that is being shown out there is contradictory to the ATA index,” said Starks, citing the ISM and other indicators.
Among those negative indicators were the 1.3% drop in factory orders announced April 2 and a 1.7% drop in durable goods orders the Commerce Department reported last week. Also, new home sales dived 30% in February.
General Motors Corp., the largest automaker, said sales fell 19%, the most among major automakers, followed by a 14% drop at Ford Motor Co. and a decline of 10% at Toyota Motor Corp.
The lone bright spot in recent economic news came from the U.S. Department of Transportation, which reported that surface trade among the United States, Canada and Mexico jumped 7.4% in January from a year earlier, including a 7.9% rise in the value of export cargo moved by truck.
“The usual suspects that you would think are weak are still weak,” TransCore’s Schrader said, such as demand for flatbeds to move building materials into California’s depressed housing market. Demand for flatbeds in the Midwest to move steel products, primarily for export, has been increasing, as the weak dollar makes U.S. products more competitive in overseas markets, Schrader and Albrecht said.
