September 2012 Cass Freight Index shows mixed results and a cautious economic outlook

With shippers preparing for a potential East and Gulf Coast ports strike that did not occur due to an extension, North American freight shipments subsequently saw a slight rise from August to September, according to the September edition of the Cass Freight Index Report from Cass Information Systems.

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.

September freight shipments and expenditures were up sequentially and down annually. Shipments at 1.115 were up 2.2 percent compared to August and down 3.8 percent compared to September 2011. This represents the 28th 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.

While September shipments often see gains in advance of Peak Season activity, the report noted that this gain had more to do with contingency planning related to the labor squabble between the International Longshoremen’s Association and the United States Maritime Alliance over a new contract, which was set to expire on September 30 but has been extended to December 29 thanks to negotiations with a federal mediator.

September also marks the second straight months shipments were down annually. Cass said that sluggish shipment levels “is a function of high inventory levels,” adding that consumer spending is still weak while retail shelves are full, eliminating the need for retailers to place large restocking orders as frequently.

“This unintended inventory growth has pushed wholesale and manufacturing inventories up dramatically, creating an overall level that tops peak recession levels,” the report noted. “Compared to the year?over?year economic improvements of the last two years ? when September shipment levels were up 7.5 and 15.5 percent in 2011 and 2010 respectively the decrease for 2012 demonstrates the weak state of the current economy.”

On top of that, the report observed that even through truck tonnage levels are up annually, conditions have flattened out in recent months.

Expenditures at 2.447 were up 3.3 percent compared in September compared to August and up 2.5 percent compared to September 2011. This marks the first time expenditures were up after three months of declines.

The report explained that the uptick was due to the gains in shipments and also pointed out that truck capacity is still tight with regionalized availability problems leading to slight rate increases.

“In 2011, both rail and truck carriers increased their rates to recover mounting cost increases,” the report said. “The higher rates stuck, but carriers have not been able to gain as much ground on rates in 2012.”

Myriad economic concerns, including sluggish GDP growth, downward activity regarding new orders and order backlogs, the pending so-called “fiscal cliff,” presidential elections, and global economic issues, among others are all weighing on consumers and businesses alike.

What’s more, when there have been positive signs of economic upticks, they have largely come from manufacturing or other sectors that are not directly tied to consumer spending activity. This has led to ongoing cautionary spending by consumers overall.

Concerns over these issues and others were prevalent at last week’s Council of Supply Chain Management Professionals Annual Conference in Atlanta last week. Various shippers and carriers told LM they continue to remain cautious on the inventory management and ordering front, as well as making major capital investments and hiring until the economic outlook becomes clearer.