Cass Freight Index report for February shows mixed results

Freight shipments and expenditures in February shot up from January to February while showing sequential declines, according to the most recent 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.

February shipments–at 1.055-were up 8.3 percent compared to January’s 0.974, which was revised, along with expenditures, to account for changes in the Cass client base, and down 2.6 percent annually.

Cass said that this shipment increase was expected, adding that it reversed four straight months of declines, which left the “starting point for 2016 significantly lower than in the last several years.” And while February’s shipments show growth, Cass said current economic conditions do not necessarily translate into a meaningful bounce back, with China’s weakening economy reducing demand, a strong U.S. dollar making exports more expensive, cautious consumer spending, and high inventories in the goods sectors reducing imports and domestic manufacturing.

And on a modal basis the report observed that rail carloads continued to be hamstrung by declines in coal loadings, with intermodal volumes still sluggish due to a lull in manufacturing activity, even though trucking volumes were decent.

Expenditures in February-at 2.31-saw a 6.3 increase over January, which did not offset the 7.3 percent from December to January’s 2.174, and a 5.1 percent annual decline.

The report said that February’s increase was an expected trend, with the annual increase in 2016 for this period surpassing 2015’s 4.3 percent annual increase and was closer to the 6.8 change for the same period in 2014.

Cass explained that strong shipment growth accounted for most of the expenditure gains, adding that “actual increases in the cost to ship are difficult to find as capacity is relatively easy to acquire, fuel prices have been steadily dropping, and the market seems unwilling to bear rate increase art the moment, adding that spot market prices have been steady as well.

In her analysis of the January Cass data, Rosalyn Wilson, senior business analyst with Parsons, and former author of the annual CSCMP State of Logistics report and contributor to the Cass report, took a cautious view, explaining that there are abundant opportunities for the economy to stumble in 2016, with sluggish economic indicators setting the scene for a sluggish first half of 2016.

“The goods sector is fast approaching the need to rationalize bloated inventories as it did midway through the recession,” wrote Wilson. “Interest rates and warehousing costs are on the rise, increasing the cost of carrying that inventory. Carrying costs have been so low since the recession that they were not a major concern, but with the Federal Reserve again considering another interest rate increase those costs cannot be ignored. Imports are holding their own as the strong U.S. dollar makes others’ goods cheaper to us, but exports are not flourishing because of the low demand for goods in general and the availability of lower-priced goods from foreign markets. The housing market and residential construction ticked up in both January and February, which results in new freight. That market will be very sensitive to climbing interest rates though. Following the trend, we should expect continued growth in March, although somewhat subdued compared to February.”