November Cass Freight Index sees shipment volumes down for second straight month

A watchful eye on inventory levels by retailers kept freight shipments and expenditures down on a sequential basis for the second straight month, with mixed results annually, according to the November 2011 edition of the Cass Freight Index.

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.

November shipments at 1.056 were down 2.3 percent compared to October and down 2.9 percent annually. Shipments were north of the 1.0 mark for the 18th straight month since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008. November represents the first time in 2011 that same month shipments were lower annually.

Expenditures at 2.268 were down 1.2 percent compared to October and up 14 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.

In her analysis of the November report, Rosalyn Wilson, senior business analyst at Delcan Corporation and author of the Annual State of Logistics Report published by the Council of Supply Chain Management Professionals, noted that while retailers reported record sales for Black Friday, those products had shipped earlier in the year and did not contribute to November shipment volume. She added that inventories have been rising steadily higher throughout the year as consumer spending has been tempered to a large degree, coupled with what she described as a dramatic drop in factory activity.

The factory activity drop-off, she said, is in the form of fewer new orders, production, and order backlogs, with retailers slow to replenish their growing inventories and consumers largely sticking to purchasing essentials.

While November’s numbers did not stand out from previous months on a material basis, Wilson said that there are various signs that the economy will see more growth in the fourth quarter, including unemployment dropping below 9 percent, a slight increase in consumer spending, and increased railroad carload volumes spurred by capacity and driver shortage concerns on the trucking side. But at the same time she observed that the most recent jobs report was due to 315,000 people who stopped looking for work and incomes dropping 2.1 percent, according to data from the United States Department of Commerce.

Despite the host of challenges at the moment, shippers and carrier have told LM things remain stable for the most part, given the current headwinds of increasing fuel costs, regulatory red tape for multiple modes, and a difficult time finding available drivers for motor carriers, which has in turn created some problems for shippers in securing capacity.

Robert W. Baird & Co. analyst Benjamin Hartford wrote in a research note that certain transport modes experienced “seasonal build, including domestic intermodal and domestic parcel. But all in, 2011 peak season [was] muted; truckload demand comparable to prior-year volumes, pressured by shipper inventory restraints and consumer demand uncertainty.”