Cass Freight Index is down again in January

Following a decline in December freight shipments, the first month of 2011 continued that trend, according to the most recent edition of the Cass Information Systems Freight Index.

January shipments at 1.010 were up 12.3 percent year-over-year and down 4 percent compared to December’s 1.049. Shipments remained above the 1.0 mark for the ninth straight month, with May 2010’s 1.014 shipment mark being the first time shipments eclipsed 1.0 since November 2008.

January shipment expenditures at 1.859 were up 27.2 percent over January 2010, and expenditures were down 3 percent compared to December’s 1.912 expenditure reading.

As LM has previously noted, many trucking industry executives and analysts consider the Cass Freight Index as an accurate barometer of freight volumes and market conditions, with Credit Suisse analyst Chris Ceraso stating in research notes 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.

The ATA’s advance seasonally-adjusted (SA) For-Hire Truck Tonnage index was up 2.2 percent in December, following November’s revised 0.6 percent decline (up from -0.1 percent) and a cumulative 2.8 increase over September and October. The ATA said that the current SA index is 111.6 (2000=100), marking the highest level since September 2008. And on an annual basis, the SA is up 4.2 percent, topping November’s 3.3 percent gain.

The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 107.2 in December, down 1 percent from November, which was down 3.7 percent from October. The NSA was up 4.4 percent in December compared to December 2009’s 102.9 reading.

An analysis of the January Cass numbers provided by Rosalyn Wilson, senior analyst with Delcan Corporation, noted that shipment volume got off to a slow start in the first half of January, but increased substantially as the month progressed.

“Lingering retail inventories—combined with a very cautious approach to product replenishment—resulted in moderate shipments of consumer goods,” wrote Wilson. “This does not signal another long-term downward trend for freight, but is rather one of the bumps expected during the recovery. Consumers are not leading the recovery as they have after previous recessions, which mean this is new ground for charting the future. The trend will be for much leaner inventories and immediate response to inventory stockpiling. Industrial production has been rising for the last several months and manufacturing orders have also picked up substantially, both of which will lead to increasing freight volume.”

Wilson added that with freight capacity still fairly abundant there has not been significant pressure on rates, even though freight expenditures were up 27.2 percent annually in January. She explained that with the inventory re-build of the first half of 2010, in which carriers were able to successfully increase rates, complete, carriers have not yet since regained the pricing power they had during that time. But, rates, she said will rise quickly should shipment volumes grow and capacity tightens.

In an interview with LM, FTR Associates President Eric Starks said that tightening is more of an issue on the truckload side than the less-than-truckload (LTL) side, although he noted there are some signs of capacity imbalance on the LTL side but not to the level seen for truckload.
“The pressure is mainly on the truckload sector,” he said. “As business activity picks up, though, we think the LTL sector will be impacted, too. The freight environment in the fourth quarter was somewhat stagnant, but as things move forward it will accelerate through this year and that is a good thing.”

The Cass and ATA numbers come at a time when there continue to be various underlying mixed signals regarding the economic recovery and its strength. While retail numbers and consumer confidence appear to be gaining steam, sluggish unemployment and housing data continue to be a drag on the overall economic outlook.

Despite the mixed messages, myriad shippers and carriers have told LM they are more positive on volume growth prospects in 2011, but they are acknowledging it will be a gradual return to pre-recession levels, even though most signs are pointing in the right direction.