Cass Freight Index is mixed but calls for slow growth ahead

The August edition of the Cass Freight Index report showed mixed results in terms of freight expenditures and shipment volume, respectively.

The Cass Freight Index accurately measures trends in North American shipping activity based on $20 billion in paid freight expenses of roughly 350 of America’s largest shippers, according to Cass officials.

As LM has reported, many trucking industry 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.

Freight shipments—at 1.126—were down 0.4 percent compared to August 2012 and up 1.7 percent compared to July, with August marking the 37th consecutive month shipments topped the 1.0 mark since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008. Cass officials said the sequential gain in shipments was expected, citing recent increases in manufacturing orders, imports, and exports.

But on a same month basis the report noted that August shipments on an absolute basis were down compared to 2011 and 2012 although the gap has narrowed, adding that on a cumulative basis the total number of shipments has gone up 5.1 percent since January.

Freight expenditures—at 2.448—were up 3.4 percent annually and down 1.5 percent compared to July, snapping a three-month stretch of increases.

Freight rates currently are not seeing much pressure on the trucking side, as motor carrier Hours of Service regulations that took effect in July have been minimal, with enough available capacity in the entire freight market continuing to hold rates steady.

Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, wrote in her analysis of the report that barring a sudden surge in freight, which is currently not expected, or heightened enforcement of FMCSA regulations, it is expected that trucking capacity will be “adequate with little room for expansion.” She added that the truckload market has had difficulty gaining pricing power due to a plethora of carrier choices for shippers, and the less-than-truckload market has more pricing control as it is more concentrated but that it also has not made major strides on the pricing front.

“Economic reports for the last month have indicated the economy might be sparking, but probably only for a short run,” wrote Wilson. “GDP for the second quarter was revised up from 1.7 percent to 2.5 percent. Much of that rise was due to very strong exports, which grew at an annual rate of 8.6 percent in the second quarter…[which is] probably not sustainable for the rest of the year.”
Wilson also pointed to the Institute of Supply Management’s August Manufacturing Report on Business, which was up for the third straight month in August and showed rises in New Orders and Backlog of Orders and also explained how employment reports have shown steady economic growth, with these trends culminating in what she described as a “slow and steady—but low—growth rate for the rest of the year.”

On a conference call hosted by his firm today, Stifel Nicolaus analyst John Larkin the economy is continuing to grow at a sub-potential rate.

As an example, he explained that prior to the recession the economy was growing at a rate of close to 3 percent and since then it has seen growth slow down to a 2-to-2.2 percent rate coming out of the trough, when a more typical GDP growth rate would be double or even triple that rate.