December Cass Freight Index numbers reflect a sluggish year for freight transportation market

Mixed signals in the freight market were again the prevalent theme in the most recent edition of the Cass Freight Index Report from Cass Information Systems Inc.

The Cass Freight Index accurately measures trends in North American shipping activity based on $20 billion in paid freight expenses of roughly 350 of America’s largest shippers, according to Cass officials.

As LM has reported, many trucking industry 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.

December freight shipments—at 1.037—were down 6.2 percent compared to November, which represents the third straight decline as well as the steepest monthly decline for all of 2013. Shipments were down 3.2 percent compared to December 2012. Even with the decline, shipments remained above the 1.0 mark for the 41st consecutive month, when shipments moved above the 1.0 mark for the first time since November 2008. 

What’s more, for all of 2013 the average number of monthly shipments came in at 0.7 percent below the 2012 tally, as inventories remained high, manufacturing “stalled out” mid-year, and exports and import activity was mostly flat, continuing the trend of “another bumpy year in the recovery that hasn’t gotten there yet,” the report stated.

In her analysis of the report, Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report observed that even though total shipments were down in 2013, freight indicators like the American Trucking Associations’ monthly Truck Tonnage Index points to how loads are getting heavier. This, Wilson noted, matches up closely with anecdotal evidence from LTL carriers that they are carrying fuller loads. And Wilson also explained that because the Cass report does not capture a representative picture of the small parcel sector, December’s freight movement declines were partially offset by increases in small package holiday shipping.

Freight expenditures in December—at 2.387—were down 5.4 percent compared to November and up 1.0 percent annually, and the report said that total freight expenditures were up and down throughout 2013 as was the case with freight volumes. As rates for most modes were largely unchanged in 2013, Wilson said the expenditures support other data that the average shipment was larger and subsequently more expensive. 

In summing up 2013, Wilson described it as a “complicated year from a purely economic point of view,” for various reasons, including:
-a strong first quarter that was followed by a slower rest of the year;
-five three-year lows for freight shipment volumes in 2013 as expenditures hit eight three-year highs;
-a drop in unemployment even though the number of new jobs averaged below 2012;
-an improved third quarter GDP number did not lead to increased freight activity; and
-a slower housing market in the fourth quarter, among others

“Looking forward to 2014, there are some hurdles, but the freight picture should strengthen as the year progresses,” wrote Wilson. “Congress is ahead of the budget issue—which had been kicked down the road in November—so another shutdown is unlikely. Transportation employment, especially in trucking, has been rising in recent months. Globally, new orders are up, but more for exports to developing countries than to the U.S. or Europe. The market for U.S. goods should strengthen by the second half. My prediction is that freight growth will still be measurably stronger in 2014 (albeit slow and uneven). Volumes will be up consistently for several months, putting pressure on capacity before we see a rise in rates. The virtual rate freeze that has existed for almost three years should thaw and give way to higher freight expenditures by the second half of the year due to higher costs and volumes.”

Eric Starks, president of freight transportation consultancy FTR, told LM that despite the downward December results in the Cass data, his firm has anecdotally seen and heard that December overall was decent for freight, in that there was some tightening in the freight market.

While there was some tightening, Starks said there were not utilization issues and that did not lead to a major increase in freight activity, as evidenced by the sequential and annual declines in December.

“Those declines were not a huge surprise…as the last several months of Cass data have shown that to be the case,” he said. “Normally, there are some month-to-month declines, but when you look at the year-over-year data and the overall trending of the market, one would think the numbers would be a little better. Looking at industrial production, it has been pretty decent based on ISM numbers, as well as with ATA data and with our numbers, too, as well as the AAR, especially when you take coal volumes out.”