Cass Freight Index report remains in positive territory

Freight shipments and expenditures both showed significant signs of improvement for the second straight month, 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.

With both shipments and expenditures positive for the first two months of the year, as well as what the report’s author, Avondale Partners analyst Donald Broughton, described as a “growing number of data points suggesting that the economy is getting better, it appears that Broughton’s previous thesis of the freight recession coming to an end is indeed accurate.

For February, the most recent month for which data is available, shipments were up 1.9 percent annually at 1.075 and up 7.0 percent compared to January. This increase comes on the heels of a 3.2 percent annual gain in January, a 3.5 percent annual gain in December, a 0.3 November decline, and a 2.7 percent gain in October, which marked the first time it headed up in the previous 20 months.

One of the drivers for shipment gains, as has been the case in recent months, is e-commerce volumes continuing to show outstanding rates of growth, with both FedEx and UPS each reporting strong U.S. domestic volumes, coupled with strong airfreight gains in the Asia Pacific and Europe Atlantic lanes, which were up 8.0 percent and 5.9 percent, respectively in the Avondale Partners index in the most recent month available (January).

Freight expenditures at 2.383 headed up 3.2 percent annually and 5.1 percent compared to January. This follows January gains, which was the month that expenditures turned positive for the first time in 22 months, with January 2016 being its lowest level in five years, with weak demand and crude oil at less than $30 per barrel as the main reasons.

Broughton explained that part of the gains in expenditures is due to a steady increase in fuel prices over the last six months, which is being seen through pricing gains for truckers and intermodal shippers.

And he was bullish in regards to the current state of freight over all.

“Data is suggesting that the consumer is finally starting to spend a little,” he wrote. “It also suggests that, with the surge in the price of crude in October of last year, the industrial economy’s rate of deceleration first eased and then began a modest improvement led by the fracking of DUCs (drilled uncompleted wells), especially in the fields with a lower marginal production cost (i.e., Permian and Eagle Ford). We have been questioning, ‘How fast will the recovery from here be?’ However, the overall freight recession, which began in March 2015, appears to be over and, more importantly, freight seems to be gaining momentum.”

Another factor leading to the analyst’s optimism was that at the manufacturing, wholesale, and retail levels, inventory-to-sales ratios are seeing steady declines.