Tonnage Rises 5% in March

This story appears in the April 27 print edition of Transport Topics.

Truck tonnage rose 5% last month, providing a sign of continued economic expansion as fleets enter the heart of the spring freight season, American Trucking Associations reported.

The advanced seasonally adjusted index stood at 133.5, reflecting a 1.1% improvement over the February total, ATA reported April 21. The March performance capped a quarter when tonnage also rose by 5%, after the 6.7% rise in January and 3.3% in February.

Tonnage has risen sequentially for five of the past six months, and the first-quarter improvement matched the fourth quarter of 2014. ATA’s tonnage index remains near the all-time high of 135.8 that was reached in January, before a 2.8% sequential drop in February.

“While tonnage did not fully recoup the loss from February, it increased nicely in March,” ATA Chief Economist Bob Costello said. “I’d say that tonnage was one of the better indicators for the month, which is a positive sign for the broader economy.”

On the other hand, retail sales, housing and factory data were weaker than expected during March and for the first quarter, the ATA official noted.

“The next couple of months will be telling for truck freight volumes as we enter the spring freight season,” he said.

“I expect retail sales and housing starts to improve in the months ahead, which will obviously help truck freight volumes,” Costello told Transport Topics on April 22. “Factory output is being hurt by the strong dollar, so while output will grow in 2015, the rate will be less than in 2014.”

One positive sign came from the April 22 first-quarter earnings report from Werner Enterprises Inc., which ranks No. 14 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.

“A strengthening economy, combined with constrained truck capacity, is contributing to improved freight demand. Freight demand showed increasingly positive momentum, as expected, from January to February to March 2015,” the fleet’s report said. Freight demand remains firm for the first three weeks of April 2015.

James Meil, principal for industry analysis at ACT Research, said the ATA index could be a leading indicator for April economic reports, which begin to roll in this week.

“If you assume that the supply chain was being refilled in March as the West Coast ports were unclogged and the weather improved, trucking is one of the first places you would see a pickup in activity,” he said. “Those goods would show up later in the retail, manufacturing and other sectors as they’re sold.”

Among this week’s reports are the Institute for Supply Management’s manufacturing index, construction spending and April auto sales. The U.S. jobs report will follow a week later.

A round of upbeat economic reports in the days ahead could help to resolve questions about the direction of the economy, which has been producing what Meil called “discordant signals” this year, such as retail sales and factory reports that lagged economists’ expectations.

“The discordant signals may be showing that things are not OK,” Meil said, citing factors such as the strong dollar that dampened exports and the drop-off in energy exploration that hurt the economy more than lower fuel prices have helped.

“If the reports are not good,” he said, “then maybe we are in a little bit of economic trouble — not a recession but slow, slow growth.”

The ACT official also noted that the U.S. economy in the first quarter didn’t live up to expectations raised by a strong fourth-quarter performance that seemed to create momentum going into this year.

Steve Graham, FTR’s vice president of economic analysis, noted in an April 17 report the 1% drop in industrial production during the first quarter, the first such decline since the second quarter of 2009.

The decline was driven by a drop of more than 60% in the annual rate of oil and gas well drilling and servicing, said Graham, adding, “The big question is, Will manufacturing bounce back?”

Costello said that weakness in the energy sector generally held back the pace of tonnage growth, though specific amounts weren’t known.

ATA also reported that the not-seasonally adjusted tonnage index was 6.6% higher last month than in 2014 and was 17% above February.

The latest load board reports from DAT and Truckstop.com also indicated overall demand was flagging in mid-April.

The Trans4Cast report from TruckStop noted that loads posted fell.

DAT’s report showed a drop-off of 3.7% in van loads posted and a 3.9% drop in refrigerated posts.

Those reports in general have been weaker than the record pace of load board activity last year during an unusually harsh winter.