ATA tonnage numbers are solid but is the economy?

The mixed bag of myriad economic and, more specifically, freight transportation-related data truly never seems to empty.

The most recent example could be the American Trucking Associations’ (ATA) data for August truck tonnage, which came out this week. The ATA reported that seasonally-adjusted (SA) truck tonnage for the month ticked up 1.4 percent on the heels of a 0.6 percent July dip. The ATA said the 1.4 percent gain is its largest since May, which is impressive enough. But even more impressive is that August SA tonnage is 6.9 percent of where it was in August 2012 for its biggest annual gain since December 2011 while being up 5 percent annually on a year-to-date basis.

Its other key tonnage metric—the non-seasonally adjusted (NSA) index—saw a 1.5 percent uptick from August 2012 and a 2.1 percent annual increase. The NSA represents the change in tonnage actually hauled by fleets before any seasonal adjustment.

On the surface, these numbers look decent for the most part, but ATA Chief Economist Bob Costello provided some relevant insight about what the number s are really saying in some prepared comments below:

“The strength in tonnage continued again in August, with the index increasing in three of the last four months,” said Costello. “The improvement corresponds with a solid gain in manufacturing output during August reported by the Federal Reserve last week. However, tonnage’s strength in recent months, and really through 2013, is probably overstating the robustness of the economy and trucking generally.  It just so happens that the sectors of the economy that are growing the fastest - in housing starts, auto production, and energy output, primarily through hydraulic fracturing - produce heavier than average freight, leading to accelerated growth in tonnage relative to shipments or loads.

The ATA executive added that truckload industry loads have accelerated the last few months, but are flat for the year, while less-than-truckload shipments are up less than 1.5 percent in 2013.

As Costello, points out, gains in heavier types of freight are clearly impacting tonnage and perhaps making these numbers look better than they really are. But that is not necessarily a bad thing either as it speaks directly to the strength of these respective sectors that are doing quite well in an otherwise relatively average economy, especially when you look at still-sluggish retail sales numbers, which are being countered lately by encouraging West Coast port import data and industry stakeholders showing renewed confidence in the semblance of an actual Peak Season. That is still difficult, and premature, to judge until we see how October shakes out, it would seem.

Based on feedback from this week’s FTR Transportation Conference in Indianapolis, it is clear that the economy, and to a larger extent the freight economy, remain in a bit of a holding pattern.

Reasons for this that were cited by speakers at the excellent conference cited in a research report by Stifel Nicolaus analyst John Larkin included the following:
-the economy’s long run growth potential sits in the 2% to 3% GDP growth range;
-with 2 percent + annualized y/y GDP growth we will remain in the slow growth freight market that we have experienced over the past couple of years;
-base case volatility could be muted if the status quo/kick the can down the road mentality prevails in Washington; and
-potential drivers of upside potential could materialize and are also not beyond the realm of possibility

This insight highlights the fact that things are still in a bit of a holding pattern, while there are still some positive signals out there such as the aforementioned gains in housing , autos, and energy production to name a few.

Where we go from here remains murky, especially in light of the (potential) pending federal government shutdown over the debt ceiling as early as next week. That is not a new dilemma but it is unwelcome all the same. Stay tuned for more mixed data and growth signals in the coming quarters.