Freight shipment and expenditure gains continue in October, says Cass Freight Index report

A solid dose of economic momentum in recent months resulted in a strong October for freight shipments and expenditures according to the most recent edition of the Cass Freight Index Report from Cass Information Systems, which was released this week.

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.

In October, freight shipments and expenditures each saw annual gains, with shipments up for the 11th consecutive month and expenditures up for the tenth consecutive month.

“Throughout the U.S. economy, we are continuing to see a growing number of data points suggesting that the economy continues to get incrementally better,” wrote the report’s author Broughton Capital Founder and Managing Partner Donald Broughton.

Freight shipments in October, at 1.153, were up 2.9% annually and 0.5% over September. Broughton said that this increase further solidifies his thesis that the first positive indication in October 2016 was a “change in trend,” as it snapped a stretch of 20 months of negative shipment growth and was an early indicator that a freight recovery was happening.

What’s more, October 2017 shipments topped three of the last four Octobers and was in line with the most recent record high from October 2014, which was also at 1.153. Prior to that the previous record was 1.264 from October 2007.

“Data continues to suggest that the consumer is finally starting to spend a little, albeit not with brick and mortar retailers,” wrote Broughton. “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 in most segments.”

Another driver for freight shipments cited by Broughton is how parcel volumes associated with e-commerce continue to show outstanding rates of growth, with both FedEx and UPS reporting strong U.S. domestic volumes.

October expenditures, at 2.606, rose 11.2% annually and 3.9% over September. This continues a strong run of increases, including: a 7.4% gain in May; a 5.4% increase in June; a 4.5% increase in July; a 9.7% increase in August; and a 4.6% increase in September.

September’s 11.2% annual gain is the second-largest percentage gain in the last five years, trailing only June 2014’s 12.1%.

“Expenditures (or the total amount spent on freight) turned positive for the first time in 22 months in January 2017, albeit against an easy comparison,” wrote Broughton. “Not since 2011—when the economy was still climbing out of the recession—had this index been so low. Our Expenditures Index in January 2016 was the worst in five years, as demand had weakened and crude oil had fallen below $30 a barrel. Although February and March of 2016 were also weak, they were not nearly as weak as January 2016 and hence a slightly tougher comp. Since fuel surcharges are included in the Expenditures Index, fuel was a negative bias in the data last year. Conversely, over the last several months we have observed that part of the increase was a result of the relatively steady increase in the price of fuel over the last nine months. But we are also seeing some improvements in the pricing power of truckers and intermodal shippers.”