Truck Tonnage Falls 1.5% in October
By Jonathan S. Reiskin, Associate News Editor
This story appears in the Dec. 3 print edition of Transport Topics.
Truck tonnage hauled in October declined 1.5% compared with the same month in 2006 — the 14th decline in 16 months — American Trucking Associations said.
ATA’s Nov. 27 preliminary report on disappointing tonnage performance was consistent with other economic data showing a decline in the level of leading economic indicators, a drop in orders for durable goods, and building permits being issued at the slowest pace in more than 10 years. Federal Reserve officials also have expressed concern about difficult credit and slower growth.
“We anticipate truck freight volumes to be lackluster for the next couple of quarters. There is nothing on the horizon that points to an acceleration in truck freight,” said ATA Chief Economist Bob Costello, who conducts the monthly tonnage survey of the group’s members.
The seasonally adjusted tonnage index dipped to 110.9 in October from 112.5 a year ago. The index compares current shipping activity with a base of 100 in 2000.
The September figure was revised down to 111.3 from an initial reading of 111.6. In the same month of 2006, it was 114.2.
For the first 10 months this year, the tonnage index has declined by 2.2% compared with the same time last year. Costello said this sets up a scenario of back-to-back annual declines, as 2006 marked a drop-off from the previous year.
The last time that happened, he said in an interview, was in 2000 and 2001.
Comparing his view of the current economy with activity in late summer, Costello said he is more concerned: “I’m definitely less optimistic now than I was then. The data that have come in since then have been less good.”
C.H. Robinson Worldwide, North America’s largest broker of truck freight, said of that market:
“Continued softness in the North American truck market slowed our truck transportation gross profit growth in the third quarter of 2007. Our truck transportation gross profit growth . . . was driven primarily by increased volumes and a small increase in our gross profit margin, offset by a slight decrease in truckload rates,” the company said in its Oct. 23 earnings report.
Douglas Stotlar, chief executive officer of Con-way Inc., said at a New York investors’ conference last month he has seen “no peak season compared with traditional patterns. Volumes are panning out as expected, but there’s been no ‘hockey stick’ surge,” he said, referring to the usual sudden fall shipping spike.
Con-way is the third-largest less-than-truckload carrier and ranks No. 6 overall on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.
Although the Commerce Department revised upward its estimate of third-quarter growth — to 4.9% a year from 3.9% — the department also said in its Nov. 29 report that the expectation for fourth-quarter growth in gross domestic product is a mere 1.5% a year.
Investors have expressed concern about the economy by driving down stock prices. The Standard & Poor’s 500 Index set a record of 1,565 points on Oct. 9 and then dropped 10.1% over seven weeks to 1,407 on Nov. 26.
The market rallied into the week, with The Associated Press attributing the gain to a Nov. 28 speech by Federal Reserve Vice Chairman Donald Kohn, who suggested the central bank might trim interest rates on Dec. 11 because of concerns about continuing troubles in credit markets and predictions on slow growth to come.
On Nov. 20, the Fed released minutes from a recent Open Market Committee meeting during which key policy-makers also expressed worries about credit markets and slow growth.
Costello said he estimates the “freight economy” — the sector that makes, sells and transports tangible goods — will grow between 0.3% and 0.7% a year through the middle of next year, and that assumes no recession is coming. He said the consensus estimate among forecasting business economists is that there is a 35% chance of a recession.
“We’re seeing services growing stronger than goods, but services don’t generate a lot of truck freight. The biggest problem is that housing is not set to recover through most of 2008.
“While $100-a-barrel oil has a big effect on the economy, for trucking what’s going on with housing is a much bigger issue,” Costello said.
Hanley Wood Market Intelligence, a research firm specializing in housing, said Nov. 27 that the housing industry remains mired in problems.
“Building permits declined [in November] to their lowest levels since July 1993. Additionally, a drop in the [October] leading economic indicators index suggests we’ll be facing more challenging economic conditions in the coming months,” the firm said.
“In November, the National Association of Home Builders’ housing market index remained unchanged at its lowest level since the survey began in January 1985,” Hanley Wood said.
The Commerce Department did say Nov. 20 that housing starts grew by 3% in October, but also pointed out they had plummeted 10.2% the month before.
This story appears in the Dec. 3 print edition of Transport Topics.
Truck tonnage hauled in October declined 1.5% compared with the same month in 2006 — the 14th decline in 16 months — American Trucking Associations said.
ATA’s Nov. 27 preliminary report on disappointing tonnage performance was consistent with other economic data showing a decline in the level of leading economic indicators, a drop in orders for durable goods, and building permits being issued at the slowest pace in more than 10 years. Federal Reserve officials also have expressed concern about difficult credit and slower growth.
“We anticipate truck freight volumes to be lackluster for the next couple of quarters. There is nothing on the horizon that points to an acceleration in truck freight,” said ATA Chief Economist Bob Costello, who conducts the monthly tonnage survey of the group’s members.
The seasonally adjusted tonnage index dipped to 110.9 in October from 112.5 a year ago. The index compares current shipping activity with a base of 100 in 2000.
The September figure was revised down to 111.3 from an initial reading of 111.6. In the same month of 2006, it was 114.2.
For the first 10 months this year, the tonnage index has declined by 2.2% compared with the same time last year. Costello said this sets up a scenario of back-to-back annual declines, as 2006 marked a drop-off from the previous year.
The last time that happened, he said in an interview, was in 2000 and 2001.
Comparing his view of the current economy with activity in late summer, Costello said he is more concerned: “I’m definitely less optimistic now than I was then. The data that have come in since then have been less good.”
C.H. Robinson Worldwide, North America’s largest broker of truck freight, said of that market:
“Continued softness in the North American truck market slowed our truck transportation gross profit growth in the third quarter of 2007. Our truck transportation gross profit growth . . . was driven primarily by increased volumes and a small increase in our gross profit margin, offset by a slight decrease in truckload rates,” the company said in its Oct. 23 earnings report.
Douglas Stotlar, chief executive officer of Con-way Inc., said at a New York investors’ conference last month he has seen “no peak season compared with traditional patterns. Volumes are panning out as expected, but there’s been no ‘hockey stick’ surge,” he said, referring to the usual sudden fall shipping spike.
Con-way is the third-largest less-than-truckload carrier and ranks No. 6 overall on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.
Although the Commerce Department revised upward its estimate of third-quarter growth — to 4.9% a year from 3.9% — the department also said in its Nov. 29 report that the expectation for fourth-quarter growth in gross domestic product is a mere 1.5% a year.
Investors have expressed concern about the economy by driving down stock prices. The Standard & Poor’s 500 Index set a record of 1,565 points on Oct. 9 and then dropped 10.1% over seven weeks to 1,407 on Nov. 26.
The market rallied into the week, with The Associated Press attributing the gain to a Nov. 28 speech by Federal Reserve Vice Chairman Donald Kohn, who suggested the central bank might trim interest rates on Dec. 11 because of concerns about continuing troubles in credit markets and predictions on slow growth to come.
On Nov. 20, the Fed released minutes from a recent Open Market Committee meeting during which key policy-makers also expressed worries about credit markets and slow growth.
Costello said he estimates the “freight economy” — the sector that makes, sells and transports tangible goods — will grow between 0.3% and 0.7% a year through the middle of next year, and that assumes no recession is coming. He said the consensus estimate among forecasting business economists is that there is a 35% chance of a recession.
“We’re seeing services growing stronger than goods, but services don’t generate a lot of truck freight. The biggest problem is that housing is not set to recover through most of 2008.
“While $100-a-barrel oil has a big effect on the economy, for trucking what’s going on with housing is a much bigger issue,” Costello said.
Hanley Wood Market Intelligence, a research firm specializing in housing, said Nov. 27 that the housing industry remains mired in problems.
“Building permits declined [in November] to their lowest levels since July 1993. Additionally, a drop in the [October] leading economic indicators index suggests we’ll be facing more challenging economic conditions in the coming months,” the firm said.
“In November, the National Association of Home Builders’ housing market index remained unchanged at its lowest level since the survey began in January 1985,” Hanley Wood said.
The Commerce Department did say Nov. 20 that housing starts grew by 3% in October, but also pointed out they had plummeted 10.2% the month before.
