Cass Freight Index is up for second straight month in March

Steady improvement in freight shipment totals and expenditures is the underlying theme of the most recent Cass Information Systems Freight Index.

Following growth in February for the first time in three months, March followed suit, according to Cass.

March shipments at 1.108 were up 13.8 percent annually and 6.5 percent compared to February’s 1.036, with shipments above for the 1.0 mark for the tenth straight month going back to May 2010’s 1.014 breaking the 1.0 level for the first time since November 20008.

March expenditures at 2.222 were up 33.6 percent annually, and were up 5.9 percent compared to February’s 2.091.

As LM has stated, many trucking industry executives and analysts consider the Cass Freight Index as 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.

The ATA’s advance seasonally-adjusted (SA) For-Hire Truck Tonnage index dropped 2.9 percent in February (the most recent month for which data is available), following 3.8 percent and 2.5 percent gains in January and December, respectively. Prior to those sequential gains, November was up 0.6 percent and September and October were up a cumulative 2.8 percent.

The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 102 in February, down 2.8 percent from January’s 105.4.

“Truck tonnage is continuing to grow, and capacity is beginning to tighten in many markets,” wrote Rosalyn Wilson, senior analyst with Declan Corporation, in a Cass report. “Production at U.S. factories has also continued to climb as businesses restock and reinvest in inventory, fueling the growth in transportation shipments. The damper has been higher fuel prices and rising prices for food and other consumer goods. Consumer confidence declined as worries of higher costs threatened the tenuous recovery in consumer spending. Business spending is still spurring the economy more than consumer spending.”

Wilson also pointed out that now that the economy is improving with most economic indicators heading upward, the freight industry is starting to benefit. She cited things like available trucking capacity being less abundant as volumes increase, which is providing leeway for carriers to increase rates. This demand increase is likely to result in the trucking industry facing equipment and driver shortages by the end of the year, she said, adding that by the end of the third quarter the ability to determine rates will shift back in favor of carriers, leading to quick and steep rate increases.

This view was supported by Lana Batts, a partner at Transport Capital Partners, in a recent interview.

Batts said that carriers are optimistic when it comes to an improving economy. And with capacity constrained to a large degree, with limited activity on the equipment buying and replacing front or expanding fleets over much of the last three years, she explained that the law of supply and demand will play out, with rates going up when capacity does expand.

These rate increases, said Batts, are already occurring and are very apparent on the spot market, too. What this means for shippers is that motor carriers have no interest in adding capacity at this point.

Instead, she explained, they need to replace old trucks, because replacement costs for older vehicles are very high, and the actual amount of capacity carriers truly want to increase is miniscule. This is due to the fact that truck buying activity was quelled in 2008-to-2010, with the majority of truck buying activity occurring being allocated for replacement trucks only to a large degree.

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