Cass Freight Index points to strong shipments and expenditure gains in July

Freight shipments and expenditures both got off to a strong start in the second half of the year, based on data in the July edition of the Cass Freight Index Report from Cass Information Systems.

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.

“From both a volume and pricing perspective, the U.S. freight economy continues to be extraordinarily strong….[and] are clearly signaling that the U.S. economy, at least for now, is ignoring all of the angst coming out of Washington, D.C. about the trade war,” wrote the report’s author Donald Broughton, founder of Broughton Capital.

“Despite concerns coming out of Wall Street about the increased threat of inflation or the continued increase in interest rates, these indices are displaying accelerating strength on top of increasingly difficult comparisons. Demand is exceeding capacity in most modes of transportation by a significant margin. In turn, pricing power has erupted in those modes to levels that continue to spark overall inflationary concerns in the broader economy.”

Through July, the most recent month for which data is available, freight shipments and expenditures have now seen annual gains for 19 and 22 months, respectively, the report said. And it added that the current level of volume and pricing growth is signaling that the U.S. economy is growing, but that level of growth may have reached its short-term expansion limit.

What’s more, addressing tight market capacity, the report said that there is confidence that the increased spending on equipment, technology, and people will lead to increased capacity in most modes, with many modes indicating there are “limited amounts of capacity or even no capacity at any price shippers are willing to pay.”

July freight shipments at 1.245 were up 10.6% annually and off 0.2% compared to June.

The report’s author, Donald Broughton, principal of Broughton Capital, wrote that the first seven months of 2018 have clearly signaled that barring a negative “shock event,” 2018 will be an exceptionally strong year for transportation and the economy, adding that July, June, May, April, and March exceeded all levels attained in all in all months in 2014, which he said was a strong year, with February, at 1.198, equal to the peak month of June, at 1.201. 

What’s more, he pointed out that the annual gains in shipments are notable because typically there are only high percentage gains in volume when matched up against easy comparisons.

“That these percentage increases are so strong and strong against tough comparisons explains why our outlook is so bullish, why capacity is so constrained and why realized pricing is so strong,” Broughton said.

July expenditures, at 2.901, were up 17.9% annually and up 0.2% compared to June.

Broughton wrote that on a nominal basis the expenditures index has now topped the all-time high from June 2014, with the expectation that it “appears poised to stay at record levels with ease in the coming months.”