Tonnage Growth Slows in Feb., Hampered by Weather, Economy

This story appears in the March 30 print edition of Transport Topics.

Weaker economic activity and a prolonged winter combined to slow truck tonnage growth to 3% last month, but the industry remains on course to grow faster as the year unfolds, industry experts said.

American Trucking Associations on March 24 said the slowest year-

over-year growth since June left its advanced seasonally adjusted tonnage index at 131.6, a 3.1% drop from January’s all-time high of 135.8.

The sequential decline in February was also triggered by reduced West Coast port activity during final stages of contentious contract talks between port operators and dockworkers.

“Hopefully, with better weather and the port situation improved, the economic data will be better for March,” ATA Chief Economist Bob Costello told Transport Topics last week.

He is maintaining his projection that tonnage this year should climb at a pace similar to last year’s 3.7% gain over 2013, buoyed by factors such as more consumer spending.

“The February drop in truck tonnage was not a surprise,” Costello said. “Retail sales, manufacturing output and housing starts were all off during the month, so the tonnage decline fits with those indicators.”

Trucking was particularly hurt by a drop in manufacturing output last month, according to the trade association, including a 3% reduction in auto production.

Industrial production, including manufacturing, mining, and utilities, inched up 0.1% last month from January, but only because utility output rose 7.3% to heat homes during a colder-than-normal month.

Durable goods orders dropped 1.4% in February from January, the Commerce Department reported March 25.

“Businesses have been extremely cautious,” Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Connecticut, told Bloomberg News last week. “The economy hasn’t been especially strong. In particular, people have had their doubts about the sustainability of growth.”

The ATA not-seasonally adjusted index, based on freight actually hauled, also slipped in February, with a 6.4% drop from January to 118.9. But compared with February 2014, that index rose 2.9%.

Costello also said that if economic and tonnage trends don’t bounce back in March, he might have to reassess his expectations for the rest of the year.

Those expectations also include growth in sectors such as housing and auto production, he said March 12.

Others also anticipate stronger markets.

“We expect truck tonnage to continue to grow in 2015,” said Deutsche Bank analyst Robert Salmon. He cited factors such as “a stronger consumer.” His report identified rising employment, solid income gains and lower gas prices that are increasing consumers’ disposable income. Expected gains in sectors such as automotive and housing also will boost trucking, he wrote.

Mark Montague, an analyst at load board operator DAT, said overall freight levels through March 21 are modestly improved over weaker February levels. However, final March totals will be affected by a potential spike in activity just before the quarter ends this week.

Montague also said freight markets should hold up well next month and into the early summer, based on recent trends.

He cited March improvement on the West Coast, where freight levels slumped in the two prior months. Though it’s increasing, Montague said current activity trails seasonal norms in the region.

Still, sluggish signals came from Western rail intermodal loadings, which continue to trail last year, the Association of American Railroads said last week.

Bloomberg underscored the disruption before a Feb. 20 tentative agreement covering about 20,000 West Coast dockworkers by identifying more than a dozen retailers who were hurt when dozens of ships were delayed crossing the Pacific Ocean.

Apparel maker Lululemon lost about 2% of revenue because freight was trapped on ships. Revenue also was reduced at clothing chains Macy’s, Gap and Chico’s.

But there are signs of strong growth in March at such East Coast ports as Savannah, Georgia, due to cargo diversion from the West Coast, Montague added.

Freight is arriving there this month because of the longer water route through the Panama Canal.

Truckstop.com, another load board operator, also said mid-March freight markets were strongest in California, Georgia, North Carolina and Midwest states Ohio, Indiana and Illinois.

Ken Harper, DAT’s marketing director, told TT there are parallels between 2015 and 2013 freight patterns early in each year, with similar hot freight markets such as the Southeast.

“The only difference is that 2015 has stronger freight,” he said.