August edition of Cass Freight Index report shows shipment and expenditure declines

August followed a similar pattern laid out in July in the most recent edition of the Cass Freight Index Report from Cass Information Systems, with declines for both freight shipments and expenditures.

Many freight transportation and logistics executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

August freight shipments—at 1.127—were down 1.2 percent compared to July, following a matching 1.2 percent drop off in July, and are down 0.033 percent from the 2015 high of 1.160. The annual decline for shipments in August was steeper, down 4.6 percent compared to August 2014. Despite the annual and sequential declines, shipments eclipsed the 1.0 mark for the 60th time in August.

The report observed that this decline “did not follow the typical upward movement in August, but given the weak level of new manufacturing orders placed in June and July it is not unanticipated.”

What’s more, Cass explained that August’s shipment decline is a diversion from typical seasonal patterns for that time of the year, as retailers are typically stocking up for fall sales, although high inventories and a rising inventory to sales ratio held back order activity, coupled with retail, housing, and manufacturing inventory levels well above the high point before the inventory drawdown at the beginning of the Great Recession. 

August expenditures—at 2.432—were down 2.0 percent compared to August and 8.0 percent annually. This is the second straight decline and the third decline in 2015. Cass said the declines exceeded expectations, with truck spot prices dropping due to higher available capacity.

With capacity typically not an issue in August, Cass said it can lead to decent spot market rates, which was the case with low spot rates in August that helped to drive the decline in August expenditures. As for September, the expected gains in freight shipments are expected to help drive expenditures back up, with Cass noting that rates are expected to be mostly flat, with motor carriers not increasing rates in order to keep their top shipper customers.

Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report and contributor to the Cass report, wrote in the Cass report that even with slower overall activity intact compared to this time a year ago, 2015 is in better shape than other recent years, with consumers re-entering the marketplace in spite of various headwinds.

Wilson cited a strong consumer confidence reading in August, job growth, and low gas prices as primary factors in augmenting the thesis that consumers are bullish regarding economic growth.

Shippers and carriers to a large degree remain optimistic in terms of how things will play out through the remainder of 2015. While elevated inventory levels remain an issue that could dint shipment growth, many stakeholders maintain that 2015 is likely to finish strong. Another factor is GDP growth, should it continue to build off the most recent second quarter estimate of 3.7 percent, having the ability to serve as a strong baseline for both future freight growth and consumer confidence.

“With consumer spending up only a meager 0.01% in August,  a tonnage drop [in Cass data] is not too unexpected if we look at inventory levels going into the month,” said Chuck Clowdis, managing director of transportation advisory services for IHS Global Insight. “This hopefully is only a mild cautionary event as we enter the Holiday Season this year.”