January Cass Freight Index report highlights slow start to 2013

In many ways, the January edition of the Cass Freight Index report released by Cass Information Systems earlier today was much like the one issued by Cass for December in that freight transportation market conditions were relatively flat and possibly heading downward.

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.

Freight shipments in January were down both sequentially and annually. Shipments—
at 1.020—were down 4.8 percent compared to December and down 2.5 percent compared to January 2013. January marks the 30th consecutive month shipments were above the 1.0 mark since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008.

Cass officials said that total shipment volume has fallen in each of the last four months, which mirrors the contraction in GDP during the same period. And they added that in each of the last two years freight shipment volume ended the year at roughly the same pace they began, but 2013 is the first year since the recession that January shipments were lower annually.

Taking this a step further, the report said that total 2012 railroad carloadings were below 2011 and contracting at the end of the year, and January rail movements began the month strong before slowing down in the second half of the month. And it added that truck shipments were “sluggish” in January, whereas intermodal nearly broke an annual record in 2012 and was up 3.5 percent in January compared to December.

Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, said in the report that even though there are signs that some sectors of the economy are trending positively, there are some things holding down freight shipments, among them are inventory levels.

“Inventory levels ‐ which have climbed higher than pre‐recession levels ‐ accompanied by lagging sales, pushed up the inventory to sales ratio in the second half of 2012,” wrote Wilson. “In January, the inventory to sales ratio was unchanged from December at 1.28. This level indicates that the inventory buildup may be cause for some concern and is impacting future orders for goods. Mounting unsold inventory could result in inventory rationalization and increased obsolescence. Retailers and their suppliers are placing smaller orders to bring the inventory sales to inventory ratio back in line. High inventories without corresponding high sales reduce the number of loads being shipped throughout the system.”

January freight expenditures at 2.233 were 5.5 percent below December and down 1.6 percent compared to January 2012. The decline in Expenditures growth snapped a four-month streak of gains, following three months of declines from June through August.

The annual decline in freight expenditures is in sharp contrast to previous annual January gains in recent years of 22.1 percent and 27.2 percent, respectively, in January 2012 and January 2011.

Wilson said the decline in shipment volumes represent a significant portion of the decline, adding that capacity in the truckload spot market is currently not tight, which has pushed down spot market rates.

A noted freight transportation expert told LM the current Cass data represents a very accurate reflection of freight transportation market activity.

“Despite a rising stock market and more valuable 401K’s, consumers are extremely cautious with their spending,” said Charles W. “Chuck” Clowdis, Jr., Managing Director-Transportation Advisory Services, at IHS Global Insight. “Unemployment is still ‘in the room’ as well as the too numerous ‘under-employed.’ Both number of shipments and freight spend dropped dramatically from December and for the first time reflect a year-over-year decline in January. Transport providers in all sectors should be concerned and monitor declines closely.”