July 2012 Cass Freight Index shows minimal growth

The heading of the July Cass Freight Index Report from Cass Information Systems, “Slow growth in freight; slow growth in the economy,” aptly sums up the current freight environment, which continues to flatten out and lack true signs of growth. And the report’s data also tells the same story, too.

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.

July freight shipments and expenditures were mixed sequentially and annually.
Shipments at 1.142 were down 0.7 percent compared to June and up 1.8 percent compared to July 2011. This represents the 26th 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.

Expenditures at 2.394 were down 2.0 percent compared to June and up 0.9 percent compared to July 2011.

The report explained that while July expenditures were up 0.9 percent annually, total freight spending is up 5.5 percent on a year-to-date basis, adding that rates were up significantly in 2011 and will probably remain level for the next few months.

And Rosalyn Wilson, senior business analyst at Delcan Corporation and author of the annual CSCMP State of Logistics Report, wrote in the report that there are various economic indicators that indicate a further slowdown for freight movement is likely.

She cited the Institute for Supply Management’s Manufacturing Report on Business PMI showing economic growth contracting in July for the second straight month after 34 months of growth, coupled with new orders—often viewed as the driver of economic activity—declining domestically and abroad, which translates into less freight to move in the coming months.

Sluggish jobs numbers over the last five months and an unemployment rate above 8 percent are also hindering growth, too.

“Uncertainty is plaguing the economy with both consumer and business confidence flagging,” wrote Wilson. “Credit remains tight and many businesses are reporting that they are going to put off spending and investment until 2013. Worries about expected tax cuts in January after the elections are also slowing business orders for durable goods. The slight bump last month was due primarily to military spending. Retail sales growth is expected to come in around 6 percent in 2012, compared to 7.4 percent in 2011. Retail sales should be returning to positive growth with back?to?school and end of summer sales coming up. It does not appear that the economy has sufficient momentum for the second half of 2012 to grow faster than in the first half.”

BB&T Capital Markets analyst Thom Albrecht wrote in a research note that July was a little better than carriers expected, with June not providing a surge, although that does not mean July was a strong month.

The next critical evaluation for freight is late August onward, he wrote, adding that while there has been little to no fall trucking peak since 2006, intermodal continues to have a modest fall peak.

In addition, while the traditional trucking peak is gone, from late September through early November is still a seasonally busy period,” stated Albrecht. “Supply and demand remain relatively tight, but no tipping point has emerged this year. Service failures (with reefer and flatbed containing some exceptions) remain relatively low and load acceptance rates remain high.”