Cass Freight Index shows further signs of economic moderation
June 06, 2011
In continuing the theme from its previous report, today’s release of the Cass Information Systems Freight Index showed that a moderation in freight volumes is still intact.
Cass’ May report showed that shipments at 1.111 were 0.2 percent less than April’s, which was 0.45 percent ahead of March. Even with flat volumes, shipments were above the 1.0 mark for the 12th straight month going back to May 2010, when it topped 1.0 for the first time since November 2008. On an annual basis, May shipments were up 9.6 percent, which was below April’s12.3 percent annual comparison.
May expenditures at 2.317 were up 1.7 percent from April and 29.6 percent compared to May 2010.
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 0.7 percent in April after increasing a revised 1.9 percent (from 1.7 percent) gain in March. This index was down 2.7 percent in February and was up 3.8 percent and 2.5 percent, respectively, in January and December.
The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 113.6 percent in April, down from March’s 123.3. On an annual basis, the SA was up 2.0 percent from April 2010.
More flattening—or moderation—in volumes could be on the horizon in the coming months, according to Rosalyn Wilson, senior analyst with Declan Corporation.
“Although many industry observers are still predicting a strengthening as we head to the second half of the year, the underlying pieces are not falling into place to support anything more than weak growth,” Wilson wrote in a Cass report. “Retail sales rose in May, but were well below what had been forecast for May and lower than April’s numbers. The Consumer Confidence Index dropped sharply in May from 66.0 to 60.8, reflecting consumers’ uncertainty and rising pessimism about inflation, their income prospects, and the housing market.”
Wilson added that the economy is in “stall” mode, as it began to weaken after the impacts of the federal stimulus program diminished, explaining that the underlying economy has shown very feeble signs of strengthening since the end of the recession, due to things like public sector job losses, a leveling off of the average work week and price increases for things like food, fuel, and medicine.
Noel Perry, FTR Associates Managing Director and Senior Consultant, said there are two things to consider when looking at the Cass data and the state of the economy.
“Recoveries always have soft patches,” he said. “We have never had a recovery that did not last longer than this one, except in 1982 when the [White House] raised interest rates dramatically to create a recession. The second thing is that this pause is completely predictable. This is because of the increase in fuel prices and the dramatic slowdown in Japanese manufacturing, which has kicked off a global manufacturing slowdown.”
But in both of these cases, Perry said the negatives are temporary, as the Japanese manufacturing sector has begun to expand again, with Toyota already back to 90 percent production. He explained there are various reasons for the economy to expand in the second half, saying the current situation is an exercise in nerve in several respects, with no reason to panic.
The recovery, he said, will be manufacturing-led, coupled with an increase in consumer spending.
“The ISM service industry and manufacturing numbers still show economic expansion,” said Perry. “They are not as strong as they were a year ago. There have been several slowdowns in the recovery already and this is just another one.”
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