Cass Freight Index points to ongoing strength in freight economy

October freight shipments and expenditures saw decent annual gains and sequential declines, according to the most recent edition of the Cass Freight Index Report issued this week by Cass Information Systems.

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.

October shipments, at 1.224, were up 6.2% annually and down 1.4% compared to September. This marks the 25th consecutive month of growth for shipments.

The report’s author, Donald Broughton, principal of Broughton Capital, said that it is clear 2018 will be an extraordinarily strong year for transportation and the economy, noting that shipments from March through October topped all levels for the same period in 2014, which was a solid year.

“Despite all the recent turmoil in the financial markets and the resulting concerns about the strength of the economy, the Cass Freight Shipments Index is clearly signaling that the U.S. economy, at least for now, continues to be extraordinarily strong,” explained Broughton. “Simply stated, when shipment volume is up 6.2%, it is the result of an expanding economy. We are hard pressed to imagine a scenario, sans a catastrophic geopolitical event, in which such a strong rate of freight flow expansion was possible or even a precursor to an economic contraction. Our confidence in this outlook is emboldened by the knowledge that, since the end of World War II (the period for which we have reliable data), there has never been an economic contraction without there first being a contraction in freight flows. Conversely, during the same period, there has never been an economic expansion without there first being an expansion in freight flows.”

October expenditures, at 2.919, were up 12% compared to October 2017 and down 2.4% compared to September.

On a year-to-date basis, pricing gains in 2018 are coming off similarly strong increases in 2017, with these increases seeing the largest annual percentage increases since the 2009-2010 period, with Broughton saying the current comparisons are not easy ones.

“We have commented repeatedly that this was indicative of an economy that is continuing to expand, wrote Broughton. “October’s 12.0% increase signals that capacity is tight, demand is strong, and shippers are willing to pay up for services to get goods picked up and delivered in all modes throughout the transportation industry. The October percentage increase is less than September’s 19.3% primarily because this October’s increase was on top of an 11.2% increase in 2017, while the September 2017 increase was on top of a less impressive 4.6%. Put another way, the two year stacked increase (2018 vs. 2016) in expenditures was 24.8% in September and 24.6% in October.”