Shipment growth outpaces expenditures for second straight month in Cass Freight Index report

As was the case in its previous edition, the March edition of the Cass Freight Index signaled that shipment growth topped cost growth, resulting in mostly flat freight rates.

The Cass Freight 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.

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.

March shipments at 1.094 were up 2.1 percent compared to February and down 1.3 percent compared to March 2011. This marked the 22nd 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.

Expenditures at 2.317 were up 1.0 percent compared to February and up 4.3 percent compared to March 2011. Cass officials said in the report that “the impact of moderate contract rates, which shippers negotiated last year when they were expecting significant increases in 2012, has been the dampening of what would otherwise be upwardly moving rates,” adding that “[r]ates on the spot market rose throughout most of March in response to increasing demand and tightening capacity.”

In addressing the fairly low sequential shipment growth, Cass cited record low inventories, coupled with low demand, as the drivers for low growth.

What’s more, Cass explained that while truck shipments have been showing growth as has intermodal loadings, which were up 2.4 percent annually. But rail carloads, which are often ahead of the pack, were down 2.2 percent in the first quarter of 2012 compared to last year.

In her analysis of the 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, wrote that March’s 1.0 percent uptick in expenditures was down annually and also down from a 22.1 percent annual differential in January.

“Although many costs, especially labor and fuel, have been on the rise in the first quarter, rates are not rising to recoup the added cost,” wrote Wilson. “Industry surveys of both shippers and carriers have indicated that sharp increases in rates are expected, but so far demand has not been strong enough to support rate hikes.”

Wilson also explained that even with moderate freight growth the economy continues to show positive signals of growth, including businesses hiring more than 200,000 new employees in March, slowly growing retail sales, and increased consumer confidence. Other signs included decent manufacturing growth and higher export levels, while imports are down.

“Things are mostly in a good place,” said a shipper whom declined to be identified. “Obviously, we would like to see rate margins rise in conjunction with volumes, but considering where the market was, things could be much worse.”