Tonnage Hits Record High

This story appears in the Sept. 29 print edition of Transport Topics.

August’s truck tonnage index jumped 4.5% from a year ago to a record 132.6 reading, American Trucking Associations said Sept. 23.

ATA’s advanced seasonally adjusted for-hire index was also up 1.6% on a monthly basis from July, and eclipsed the previous high set last November at 131.

ATA uses the year 2000 as a 100-reading baseline.

The year-over-year jump — the biggest this year — followed a 3.7% July increase that was revised up from an originally reported 3.6% gain.

Bob Costello, ATA chief economist, said higher retail sales and factory production in August helped push tonnage to its highest level ever.

Retail sales rose 0.6% from July to $444.4 billion, and the Institute for Supply Management’s monthly factory index rose to 59 to hit a 3½ year high.

Tonnage “followed the track of retail sales this month,” Costello said. He added that “if you forced me to use only one indicator to track truck tonnage, I would go with ISM” though “in reality” all economic factors affect tonnage levels.

Tonnage was up despite a slip in industrial production and housing starts on a month-to-month basis from strong July readings.

“Truck tonnage actually did the opposite. Not only did it increase, it accelerated,” Costello told Transport Topics. “I thought it was very interesting that two major indicators fell, and we had a new record.”

ISM’s manufacturing index of 59 in August was the highest since March 2011. Readings above 50 indicate expansion.

The Commerce Department reported Sept. 25 that August durable goods orders fell 18.2% as commercial airline orders plunged. Excluding transportation equipment, orders improved 0.7%.

Tonnage has risen 3.1% sequentially in the past two months and has surged 6.8% since falling to a recent low in January, largely attributed to inclement weather.

Tonnage is also up 3.1% year-to-date — an increase from the comparable 2.9% figure through July — and 2014’s monthly year-over-year gains since January all have exceeded 3%, with the exception of June.

“I’m optimistic for the second half of the year about the economy, which means truck tonnage should do well too,” Costello said, adding that tonnage also was boosted by ongoing strength in oil-production shipments, which tend to be heavy.

One trucking industry analyst said that while economic growth has been largely positive since the recession, he expects a “delicate balance to continue going forward” between the economy and trucking growth.

“We see about a 2% GDP growth rate, which is where we’ve been for the past three years,” John Larkin, managing director of Stifel, Niclaus & Co., said during a Sept. 19 conference call.

“Total [less-than-truckload] tonnage is actually growing a little bit faster, [which] may be due to the fact there’s less of a driver shortage in the LTL industry, so you’re seeing some overflow from truckload into LTL,” Larkin said.

“The industrial part of the economy seems to be doing better than the consumer portion,” he said, adding that GDP growth has cooled somewhat to growth rates of 2% to 2.2% since coming out of the recession, from around 2.9% prior to that.

While spot-market freight demand has rebounded somewhat into September and remains relatively tight, it’s “not as quite as robust as it was in the spring,” Larkin added.

In the meantime, a Federal Reserve Board official said last week that “the U.S. economy will continue to expand, albeit at a moderate pace,” and that growth next year will be “not that impressive, just OK,” at just under 3%.

Most risks to the U.S. economy will come from overseas, William Strauss, senior economist at the Federal Reserve Chicago district bank, said Sept. 23 at the Intermodal Expo in Long Beach, California.

Strauss cited lack of demand for new housing but on the positive side projected a 4.2% industrial production growth rate for this year while citing optimism among purchasing managers, another indication that manufacturing activity could further stimulate trucking.

Benjamin Hartford, an analyst with Robert W. Baird & Co., said last week that spot truck activity, while remaining healthy, is moderating in September.

“The sequential softening is most likely due to trends normalizing following a robust [second-quarter] spot demand . . . and ahead of a normal, but muted anticipated fall peak season,” he wrote in a Sept. 22 analyst’s note.

A separate forecast last week said that U.S. retail sales could jump as much as 4.5% this holiday season over a year ago, eclipsing last year’s comparable 2.8% gain.

Sales excluding purchases of motor vehicles and fuel could rise to as much as $986 billion in the November-through-January period, according to New York-based Deloitte, Bloomberg News reported.

“There’s a combination of some real reasons to be optimistic and a psychological glow of people generally feeling better about the economy,” Alison Paul, Deloitte’s vice chairman and retail and distribution sector leader, told Bloomberg News.

Senior Reporter Rip Watson contributed to this story from Long Beach, Calif.