September Cass Index report shows seasonal growth but long-term outlook remains cautious

Despite sequential gains in shipments and expenditures, the September 2011 edition of the Cass Freight Index points to less than smooth sailing for the economy through the remainder of the year.

This index accurately measures trends in North American shipping activity based on $17 billion in paid freight expenses of more than a hundred of America’s largest shippers, according to Cass officials.

Cass data indicated that September shipments at 1.200 were up 5.0 percent compared to August, with shipments topping the 1.0 mark for the 16th straight month since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008. On an annual basis, September shipments were up 7.5 percent compared to September 2010.

Expenditures at 2.388 were up 4.6 percent compared to August and up 17.6 percent compared to last year, which is roughly half of what annual expenditures comparisons have been in previous months prior to August, which was up 15.8 percent annually, with January through July averaging 30.9 percent annual increases for expenditures.

As LM has reported, many trucking industry executives and analysts consider the Cass Freight Index as 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.

While September expenditures and shipments are up and in line with the expected seasonal increase, according to Cass officials, it does not suggest in any way that it marks the beginning of a trend towards more positive economic growth.

Among the factors cited by Cass for this are: sluggish retail sales growth; low job growth numbers; projected 2011 GDP growth of roughly 2 percent or less for the next year; and stalled consumer confidence and consumer spending levels, among other factors.

“There are no signs that the consumer sector is going to turn around in the foreseeable future,” wrote Rosalyn Wilson, senior analyst with Declan Corporation, in her monthly analysis of the Cass report. “Although all modes reported modest gains in volume during the month, we do not expect shipment volumes to continue to expand at this level—partially as a result of lower order volumes in both the U.S. and abroad in recent months. Rates should level off for the remainder of the year, and volumes will hold steady due to seasonal freight shipments.”

Wilson also noted that the Institute for Supply Management’s (ISM) Manufacturing Report on Business in September checked in at 51.6 (a reading of 50 or higher indicates expansion is occurring).

And while this report points to economic growth, Wilson explained that some of its key metrics, including New Orders and Backlog of Orders, have been declining for the last three and four months, respectively.

But Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, told LM that the news was not all bad in the September report, citing gains in Production and Employment in the manufacturing sector in September.

“Manufacturing is looking at the fourth quarter and the holiday season with cautious optimism…which could be at least respectable,” said Holcomb. “This does not necessarily translate into big numbers, but it certainly is a good sign for manufacturing.”

What’s more, should the fourth quarter end up being relatively solid, it could spell good news for further upticks in freight transportation expenditures and shipments as measured by Cass.

This was a consistent theme at last week’s Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Philadelphia, where many shippers and carriers indicated that current business levels are fairly flat but are optimistic about possible fourth quarter growth. There is a definite chance, though, that this growth could be minimal, with many calling for “muted” Peak Season.