Truck Tonnage Rises 5.9% in September

Truck tonnage climbed 5.9% in September, according to American Trucking Associations’ well-watched index, a result that should allay fears of another recession, the group reported Oct. 25.

The 22nd consecutive year-over-year increase continues a streak that began in December 2009. ATA also said its seasonally adjusted index stood at 115.8 in September, 1.6% higher than it was in August.

“I continue to believe the economy will skirt another recession because truck tonnage isn’t showing signs that we are in a recession,” ATA Chief Economist Bob Costello said. “Tonnage is suggesting that we are in a weak growth period for the economy, but not a recession.”

Costello also said broader trends in the third quarter were signaling some gains in the broader U.S. economy.

“In the third quarter, tonnage was up 0.4% from the second quarter,” he said. “Prior to the two previous recessions, truck tonnage was plummeting, but not this time.”

This year’s sequential quarterly increase was faster than the past five years, when the average growth was just 0.1%.

The latest round of economic reports underscored Costello’s view.

The Commerce Department’s broadest indicator of economic activity, gross domestic product, rose at a 2.5% annual clip in the third quarter, outracing the anemic 1.3% second-quarter pace, the agency announced on Oct. 27.

“Tonnage can do better than gross domestic product as long as manufacturing is growing at a faster pace than GDP,” Costello told Transport Topics. “If that changes (i.e., manufacturing slows down), so will truck tonnage.”

A day before the GDP report, the Commerce Department said September orders for durable goods excluding cars and aircraft, those meant to last at least three years, rose 1.7%, the most in six months.

“Manufacturing is in pretty decent shape, and this ends the quarter on a high note,” Brian Jones, a senior U.S. economist at Societe Generale in New York, told Bloomberg News, referring to the increased orders for durable goods. “We’ve got decent momentum going into the fourth quarter.”

Other recent positive reports included a 1.1% increase in retail sales last month.

Individual carriers’ and manufacturers’ comments buttressed the sense of  recent economic improvement.

UPS Inc. CEO Scott Davis used the word “optimistic” to describe the largest package carrier’s assessment of shipping demand, saying the favorable retail and manufacturing data are signs of modest growth (see story, p. 3).

Truckload carrier Werner Enterprises Inc. reported a distinct pickup in freight volumes during late August and September to match seasonal trends.

Also last week, truck manufacturers reported demand as well as stronger earnings.

“Our customers in North America are benefiting from increased freight tonnage and higher fleet utilization, which are driving the replacement of their aging fleets, resulting in increased demand,” said Paccar Inc. CEO Mark Piggott in a statement.

Other sources indicated that September was a solid month for the freight industry.

A report issued Oct. 26 by Robert W. Baird & Co. analyst Jon Langenfeld said the firm’s truckload freight index rose 3% in September over the 2010 month, another sign of improvement.

“The demand environment remains stable with expectations for a more moderate peak season,” his report said. His report also used the word “stable” to describe less-than-truckload demand.

A report from Deutsche Bank analyst Justin Yagerman on Oct. 24 also highlighted expected economic strength in the final quarter, based on a 5.9% year-over-year increase in the Conference Board’s index of leading economic indicators.

“While freight volumes have not been robust, demand remains solid and we have not seen any indication of a looming recession,” Yagerman said.

One additional positive sign was an increase in spot-market activity during September at TransCore, a load board operator. Loads made available were at the highest September level since 2005, the firm reported.

ATA also revised the tonnage result for August, saying the drop was 0.5%, rather than the preliminary result of 0.2% that was announced late in September.

In addition, ATA said its index of freight that isn’t seasonally adjusted was 3.1% lower in September than in August.