Volumes and rates continue to show growth, according to Cass Freight Index
May 08, 2014
Following signs that freight transportation market conditions may be on the mend after a difficult winter, the most recent edition of the Cass Freight Index Report from Cass Information Systems Inc. helped to confirm that trend with a strong overall performance in April.
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.
April freight shipments—at 1.161—were up 5.5 percent compared to April 2013, marking the third straight month shipments were up on an annual basis, and up 1.5 percent from March, which is a slower growth rate than the previous two months. Shipments remained above the 1.0 mark for the 45th consecutive month, when shipments moved above the 1.0 mark for the first time since November 2008. But even more impressive than that was that shipment levels hit their highest point since June 2011. That bodes well for future growth, according to Cass, with the overall economy’s performance still weak, freight has continued to gain momentum and setting the stage for a stronger second quarter.
Other factors contributing to the increase in shipments are the overall demand for spot market truck capacity, which continues to be high, coupled with reduced productivity due to regulatory drag and bad winter weather that Cass said pushed capacity to its limits, the latter of which has been an issue for several months with over the road transportation.
“Although the second quarter started with continued growth, most of the backlog related to winter weather has been cleared out and it appears that the early run of strong growth in freight will moderate in the second quarter,” wrote Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, in the report.
April expenditures headed up 2.8 percent from March at 2.621 and grew for the third straight month and were up 10.0 percent annually, as well as hitting its highest level in 15 years.
The primary driver for the hike in expenditures, not surprisingly, is tight trucking capacity leading to rate increases, with a fair amount of that occurring in the spot market over the winter, when finding trucks often became far more difficult than usual for shippers and brokers. Wilson noted that the fact that expenditures nearly doubled rates in terms of growth rate indicates that some ground was gained on the rates side. But at the same time that is not occurring quickly enough to prevent carriers from bankruptcy for truckers, which were up 40 percent, or 11,000 carriers, according to data from Avondale Partners.
In her last comment in the report, Wilson explained that despite minimal 0.1 GDP growth in the first quarter, the freight outlook is solid.
“The winter weather cannot be blamed for all of the economy’s doldrums, but it did cause some considerable pain for the freight sector,” Wilson wrote. “Despite that, freight volume was strong and, though, moderating, will continue to expand. Growth in employment and manufacturing in some key sectors such as construction and motor vehicles is an indicator that the economy is strengthening. The fast-paced expansion from the first quarter should settle into moderate growth in the second quarter.”
That feeling appears to be prevalent throughout the freight transportation sector, with many shippers and carriers telling LM that there is a feeling things are returning to normal in terms of volume levels and activity, despite tight capacity and a relatively high inventory-to-sales ratio.
“Even the gloomy transportation Guy (me) is feeling a bit more positive,” said Charles W. “Chuck” Clowdis, managing director, Transportation Advisory Services for IHS Global Insight. “Numbers still off from where we would like but the signs continue to be positive, a rare sign over the past nearly six years! Let’s keep our fingers crossed—Spring AND continuing recovery? Wow! Sounds great to me!”
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