Despite dip from June, Cass report says freight transportation market conditions are solid

Coming off of a particularly strong June, freight transportation market conditions tapered off somewhat in July, according to the most recent edition of the Cass Freight Index Report from Cass Information Systems that was issued this week.

The Cass Freight Index accurately measures trends in North American shipping activity based on $23 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.

July freight shipments—at 1.154—were up 4.2 percent annually and down 3.9 percent compared to June’s 1.201, which is the highest level for shipments since November 2007, which was slightly ahead of the recession. Shipments remained above the 1.0 mark for the 47th consecutive month. But July saw a stretch of five months of annual shipment gains snapped.

The report observed that a slight decrease in the Institute for Supply Management’s July manufacturing data had an effect on July shipments, despite seeing a nearly 8 percent gain in new orders. And it added that carload, intermodal, and trucking volumes for the month were mixed and cited anecdotal evidence pointing to a lackluster month for shipments.

Expenditures––at 2.651 in July––were up 6.7 percent annually and down 3.9 percent from June, which hit a record high of 2.760.

Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report, wrote in the Cass report that there was not a material change in rates in July, due to the fact that capacity loosened with the decrease in shipments. And she added that in recent weeks, less-than-truckload (LTL) carriers have noted that pricing is improving, which potentially portends that industry-wide rate hikes could be coming.

Despite the sequential declines in both shipments and expenditures in July, Wilson said that they are essentially following a seasonal trend and are consistent with drops for the same period in recent years and should not be “seen at the start of a decline in freight for the second half of 2014.”

Taking that a step further, Wilson noted that even before the recession summer freight activity was slower before the seasonal holiday increase, with retailers having higher inventories and exercising caution about the orders they are placing for new stock. She also said that gains in Chinese export orders and ongoing positive momentum in U.S. manufacturing bode well for freight shipment activity through the end of 2014.

“Corporate profits are strong, while consumer sentiment and household wealth are rising, putting both groups in a position to spend more this year,” wrote Wilson.

From an industry perspective, Tom Nightingale, president, transportation logistics, for Genco, a Pittsburgh-based 3PL, said that he is seeing very similar market conditions that are consistent with Cass’s findings.

“We are seeing ongoing strength in the market, with normal seasonality patterns, as we expected, in July,” he said. “But we still see the asset-based carriers emboldened and taking fairly aggressive price increases, and we see our customers––and potential customers¬¬––coming to us looking to secure capacity for Peak Season. And we have seen a lot of concern from shippers about their ability to secure long-term, reliable capacity at reasonable rates and trying to mitigate potential price increases by going out to bid more and more frequently. The driver shortage situation and the costs of signing bonuses by carriers for new drivers is being passed through in the form of rate increases.”