September Cass Freight Index report shows sequential gains and annual declines

The October edition of the Cass Freight Index Report from Cass Information Systems was mixed in that it showed annual declines and sequential gains for freight shipments and expenditures.

Many freight transportation and logistics 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—at 1.146—were up 1.7 percent compared to August, following a 1.2 percent July decline, and are down 1.5 percent compared to September 2014. Shipments exceeded the 1.0 mark for the 61st time in September. The September shipment uptick erased two months of declines, which the report said was a “traditional” month for gains as shippers are receiving goods for the holiday season, coupled with a strong U.S. dollar and a sluggish global economy helping to spark import growth.

September expenditures—at 2.49—were up 2.4 percent compared to August and down 6.6 percent annually. This snaps a two-month stretch of sequential declines.  Cass said that spot prices are currently lower, due to adequate capacity during a slowdown in August, with motor carriers holding rate increases down, with offers of guaranteed capacity in exchange for higher rates and Cass expecting only modest trucking rate increases through the end of 2015.

The report said that sequential gains for both shipments and expenditures were expected after decreases over the previous two months, with September often viewed as “the final growth spurt of the year.” 

In her analysis of the freight transportation market, Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report and contributor to the Cass report, wrote in the Cass report that there are various factors impacting current freight volumes, with a high inventory-to-sales ratio, or what she termed as “mounting freight levels” at the top of the list.

She explained that all business inventories are continuing to grow, as are inventory-to-sales ratios, which indicate that inventory is not at optimal levels based on inventory turnover rates. And she added that low interest rates, favorable import prices, and moderate storage costs have served as drivers for the inventory buildup. What’s more, if the Federal Reserve implemented a 1 percent increase in interest rates, it could lead to a 2.3 percent increase in total logistics costs at current inventory levels. But with no actual action occurring on that front, she explained that chances of consumer spending gains and an inventory reduction is not a given.

At last month’s CSCMP Annual Conference in San Diego, Wilson said with a slow economic recovery intact over the last five years that freight shipments have been similar over the last five years, although they were down in August, which she said is a departure from what has occurred in the past.

And she noted how import levels are increasing, while exports are lagging, due largely to weak economic growth, coupled with the high value of the U.S. dollar relative to other currencies.

“My read on things is that things will be slower as we end the year, but they are still much better when compared to recent years, and despite the fact that there are numerous headwinds that we are going to have to face that are not within our control, like the global markets, we certainly do have control of what we are going to do about our inventory or are considering what to do about our inventory,” she said. “I think we still need to see the kind of sustained growth we had last year and this year before we see an increase in rates, but I do think the increases in costs everyone is facing are going to have an effect on decision-making for rates.”