Cass Freight Index report remains on a path of economic uncertainty

An ongoing malaise within various freight transportation- and logistics-related subsectors shows no signs of changing, based on data in the May 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.

May shipments were up 1.3 percent compared to April at 1.091, which topped a modest 0.6 percent gain from March to April and down 5.8 percent annually and 7.0 percent below May 2014, which is steeper than the 4.9 percent annual decline seen in April.

Despite May’s sequential gains, the report said that they remain well below shipment gains over the last several years. And even with depressed shipment levels May represents a year-to-date high.

Cass also noted that railroad carload and intermodal volumes saw annual declines based on Association of American Railroads data, and truck tonnage also saw slides for linehaul and spot markets. It also said that May industrial production saw a 4 percent decrease, with manufactured goods, especially autos, seeing the steepest declines, with the May tally below expectations.

For expenditures, Cass reported that at 2.282 May expenditures were down 0.4 percent compared to April and down 10.1 percent annually. Cass called the current expenditures’ outlook in recent months “a slow downward trend” that is the complete opposite of the upward trend of previous years, with the combination of restrained freight shipment growth and abundant capacity resulting in declining rates.

What’s more, the current state of low demand, the report explained, is giving shippers more bargaining power to drive down rates. And it cited how large truckload carrier Swift removed 300 trucks from its active fleet last spring in a move to adjust the size of its actual fleet by parking trucks.

Cass said in the report that industry analysts maintain rates are being driven so low that companies will not reinvest, adding that shippers should take advantage of this current low point to secure favorable rates.

In assessing the over all economic outlook, Rosalyn Wilson, founder and president of FreightMatters, and author of the report, wrote that predicting the second half of 2016 and beyond is becoming more and more complicated with each economic report that gets issued.

While gains in average annual wages and increased consumer spending are viewed as positive, balancing that out in a negative light is May’s weak jobs report, with March and April jobs numbers both revised downward.

“The number of people seeking jobs was relatively flat in recent months, which meant lower unemployment, but the number of disgruntled people leaving the job hunt grew, reducing the labor participation rate,” she wrote. “Inventories are still too high, which is a continuing concern. Retail sales have grown steadily but slowly, but with more growth in online sales than from brick and mortar stores. Neither imports nor exports have increased substantially, nor are they expected to. We basically are at a standstill as we wait for the forecasted strengthening.”