New U.S. Bank Freight Payment Index report shows strong momentum for freight spend and shipments

Both freight spend and shipment levels for the third quarter showed both quarterly and annual gains, according to data issued in the U.S. Bank Freight Payment Index, a new report form Minneapolis-based U.S. Bank.

The U.S. Bank Freight Payment Index is a quarterly publication comprised of data on freight shipping volumes and spend on both a national and regional basis. The report’s data is based on the actual transaction payment date, highest-volume domestic freight modes of truckload and less-than-truckload and is seasonally- and calendar-adjusted. Its historical data goes back to 2010, with a base point of 100, and its index point for each subsequent quarter marks that quarter’s volume in relation to the preceding quarter. U.S. Bank Freight Payment processes more than $23 billion in global freight payments for U.S. Bank’s corporate and federal government clients.

“We have clients across many sectors, including retail and manufacturing, among others, and collect a large amount of data through our freight payment processing,” said Bobby Holland, U.S. Bank Freight Data Solutions Director. “Our customers have been looking to us for more insights, so as we have been able to gather this big data picture we were looking for ways to provide more value to our customers as well. We felt that coming up with an index based on our freight payment data, with our national and regional breakdown, would provide value, as well as to lead into for other products downstream.”

On the spending side for the third quarter, the report said that freight spend–at 164.7–topped the second quarter by 8.3% and was up 12.6% annually. The sequential 8.3% increase marks the largest quarterly increase since the fourth quarter of 2014 and reflects a tighter truck market, there report stated, while the annual increase is the largest one since the third quarter of 2011. On a year-to-date basis through the third quarter, freight spend is up 7.9%, well ahead of the 3.2% decrease for the same period from 2015 to 2016.

American Trucking Associations Chief Economist Bob Costello, whose analysis and commentary is featured in the report, said that these spending tallies reflect a trucking market that is getting tighter.

“The economy was starting to accelerate, which was followed by the storms that led to the spot market getting tighter and companies cannot find enough trucks, which all drive up the spending index quite a bit,” he said.  

Had the unfortunate weather events not occurred, Costello speculated that third quarter shipments would have been stronger, while spending would have still been solid and robust, albeit maybe not quite as high.

Third quarter freight shipments-at 133.0-were up 3.3% compared to the second quarter and up 8.6% annually.

The report explained the 3.3 sequential increase was below the second quarter’s 5.8% gain over the first quarter, which, it added, indicates a slowdown in GDP, with second quarter GDP at 3.1%.

And aside from the impact of weather-related events in the third quarter, the report cited various freight drivers, including: decent retail sales although slower than the second quarter; an acceleration in factory output as the U.S. dollar has retreated from high levels and businesses are reinvesting in capital equipment at a higher rate than in recent years; the inventory overhang in recent years has improved; and an expected increase in housing construction, due to the pending rebuilding phase from the hurricanes.  

Looking at the shipment data, Costello said that he looks at drivers of freight shipments as “buckets” in a way, with the 3.5 buckets being:

• consumer (1);
• factory output (2);
• construction with a housing focus (3);
• and the .5 bucket being the inventory cycle.

“For the first time, really, since 2014, those buckets of freight are all looking good or better, and that is why there have been three consecutive quarters of at least 3.3% quarter-to-quarter shipment gains,” he explained. “The third quarter number would have been better absent of those storms, but over the last three quarters, there has been a 13.1% gain in shipments. This market has turned. It is getting stronger in terms of volumes, and that is not only positive for the trucking industry but also positive for the over all economy.”

Regional shipment and spending highlights featured in the report were:

• the Northeast region saw the biggest shipment index gain, at 10 percent. The gain was helped along by better manufacturing activity and slightly higher housing starts compared to Q2;
• shipments in the Southeast inched up a mere 0.1 percent, as Hurricane Irma disrupted the supply chain. At the same time, spend volume jumped nearly 5 percent as truck capacity undoubtedly tightened; and
• the Midwest led the pack in overall spend, jumping 13.3 percent to a record high. The region was assisted by a rebound in general manufacturing activity