January Cass Freight Index report highlights a slow beginning to 2014

Following a pattern of declines to finish 2013, the January edition of the Cass Freight Index Report from Cass Information Systems Inc. showed a pattern of more of the same, with sequential declines in freight shipments and expenditures from December to January.

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.

January freight shipments—at 1.000—were down 3.6 percent compared to December, which represents the fourth straight monthly decline. Shipments were down 2.0 percent compared to January 2013. Even with the decline, shipments remained above the 1.0 mark for the 42nd consecutive month, when shipments moved above the 1.0 mark for the first time since November 2008. 

The report explained that even with GDP improving in the second half of 2013, that growth has not carried over into freight volumes, coupled with the fact that weather was an issue for production and deliveries as well.

Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, noted in the report that January as usual saw a post-holiday drop along with traditionally being the slowest month of the year, with volumes typically rising in the spring, flattening or dropping in the summer, peaking in August and September, and then dropping to levels last seen at the beginning of the year.

“This year begins the same, with January shipment levels the lowest since 2010,” Wilson wrote. “Railroad carload and intermodal loadings-good barometers of the volume of freight moving-have trended down in the last three months. Snowy January weathers contributed to the depressed figures. That being said, many of January’s other indicators do not point to a quick turnaround next month.”

Wilson also cited the 13.2 percent drop in New Orders from this week’s Manufacturing Report on Business to 51.3 and its core metric, the PMI, falling to 51.3 (anything below 50 signals contraction) as a concern.

Freight expenditures in January—at 2.265—were down 5.1 percent compared to December and up 1.4 percent annually, with the report observing that this decline was due in part to the 3.6 percent shipment drop from December to January. What’s more, it was observed in the report that freight expenditure movements have outpaced shipment volumes, resulting in low growth for freight rates, with truckload rates seeing modest growth and increased traction for rail rates.

Assessing the current state of the economy, Wilson said that even though many industry observers believe the economy will gain momentum this year, there are things standing in the way of that possibly happening, including: the nearly imperceptible growth in volumes; a weak global marketplace, with exports lagging expectations; not enough new jobs being created to sustain the economy; increasing interest rates

“This will have repercussions in the freight sector. The inventory levels that are now higher than those during 2009, when carrying costs were minimal, will become more burdensome and will probably lead to a drawdown similar to what we saw during the recession,” wrote Wilson. “Trucking capacity is at exactly the right level for the volume of freight we have today, but will become inadequate later this year if the predictions of a robust 2014 materialize. Obtaining credit to purchase new vehicles will become more difficult, probably squeezing out smaller and marginal trucking companies that don’t have the capital to expand their fleet or ‐ almost as important ‐ modernize their fleets. Continue to expect a bumpy ride.”

This sentiment hits home with shippers, too.

Jeff Brady, director of transportation for Harry & David, a multi-channel specialty retailer and producer of branded premium gift-quality fruit, gourmet food products and other gifts, told LM that capacity pressure is expected in the first quarter due to various factors.

“Capacity no longer just appears in January, post holiday peak, as it used to,” explained Brady. “This is driven, I feel, by a fear on the carrier’s part to add capacity in a shaky economy and that sheer fact that since 2009, carriers are playing defense. They are only recently considering loosening the purse strings but their behavior is somewhat driven not just by economic conditions but by shipper behavior. We, as shippers, must commit to the partnership and get away from this ‘transportation as a procured commodity’ mindset. Until then, we will continue to see this trend of contraction/stagnation by carriers continue, especially in light of the ever-present legislative and economic pressures.”