Cass Freight Index is solid in January despite tough annual comparisons

Freight transportation shipments and expenditures were solid to begin 2019, in light of difficult annual comparisons, according to the most recent edition of the Cass Freight Index report, which was released today by Cass Information Systems.

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) index at turning points, which lends to the value of the Cass Freight Index.

January shipments, at 1.128, slipped 0.3% annually and 1.2% compared to December. This is the second straight month of negative shipments, following a 0.8% decrease in December, and a stretch of 24 consecutive months of shipment growth prior to that. The report explained that the last two months were up against respective all-time highs reached in December 2017 and January 2018, coupled with stabilizing patterns in nearly all underlying freight flows.  

Donald Broughton, the report’s author and principal of Broughton Capital, wrote that shipments could continue to be lower in the coming months, while still expanding at percentage rates lower than in early 2018, due to: lapping increasingly difficult comparisons; infrastructure in many industries showing signs of being at or near full capacity; infrastructure in most modes of transportation at or near full capacity; and unemployment low enough to make growing the active workforce incredibly challenging.

“[F]urther large percentage increases in the short term are increasingly difficult without significant investments in growth and technology,” noted Broughton. “Setting aside all the intricacies about the limitations on the rate of growth that’s possible (on top of already strong growth) the Cass Shipments Index is still signaling strong economic growth.”

January expenditures, at 2.792, were up 7.8% annually and down 4% compared to December.

Broughton said that this reading is signaling continued overall pricing power for those in the marketplace who move freight, adding that demand is exceeding capacity in most modes of transportation by a material amount and pricing power has erupted in those modes to levels that spark inflationary concerns in the broader economy.

But he said inflationary concerns are tempered for a few reasons, including how nearly all modes of transportation are using the current environment of pricing power to create capacity, which “will first dampen and eventually kill pricing power.” And he also said that spot pricing rates (not including fuel surcharge) in dry van, reefer, and flat bed trucking have been falling for six months, the cost of fuel is included in the expenditures index.