Cass Freight Index takes a step back in October

Following two straight months of growth, the October edition of the Cass Information Systems Freight Index fell in October.

Even with the decline, the index, which measures the numbers of shipments and expenditures that are processed through Cass’s account payable systems, has been up six of the last eight months.

October shipments at 1.058 were 5.2 percent lower than September’s 1.116 and marked the sixth straight month shipments have been over the 1.0 mark, with May’s 1.014 shipment mark being the first time shipments topped 1.0 since November 2008. October shipments were up 12.9 percent year-over-year.

October shipment expenditures at 1.976 were 2.7 percent less than September’s 2.031 and were even with August’s 1.976.  Expenditures were up 23.2 percent compared to October 2009.

Many trucking industry executives and analysts consider the Cass Freight Index as an accurate barometer of freight volumes and market conditions, with Credit Suisse analyst Chris Ceraso stating in research notes 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.

The ATA recently reported that advance seasonally-adjusted (SA) For-Hire Truck Tonnage index was up 1.7 percent in September, following a revised 2.8 percent decline in August and a 1.7 percent gain in July. The ATA also reported that its not seasonally-adjusted index (NSA), which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, came in at 112.4 in September, which was below August’s 113.5 by 0.9 percent. Compared to September 2009’s 107.8 NSA, the September 2010 NSA is up 4.6 percent, a smaller annual increase than August’s 7.7 percent.

As LM has reported, in the first half of 2010, many shippers, carriers and analysts said they were optimistic about the trucking market, especially when comparing it to 2009. But since then there have been various economic reports, including last week’s federal government report that third quarter GDP inched up to 2.0 percent in the second quarter from 1.7 percent in the first quarter, and others which indicate the recovery is slowing down.

Some other signs of a slowing economy are also evident, with unemployment still high, retail sales and consumer confidence sluggish. These factors all have the potential to bring tonnage growth down in the coming months.

This view was supported by Michael A. Regan, President and CEO of TranzAct Technologies, a full service logistics firm offering freight payment, audit, logistics consulting, as well as decision support software, and frequent blogger for LM.

While Regan described TranzAct’s business conditions as very strong despite the current economic environment, he said that the October Cass numbers are disconcerting on multiple levels.

“We have seen some things from a pricing perspective which tells us that the economy is very weak,” said Regan. “If this is a recovery, then it is anemic at best. The reason why the Cass October shipment number is so alarming is because October and March are the two heaviest shipping months, and October should always be higher than September. The fact that it is down relative to September is cause for alarm. And what we are seeing from carriers on the truckload side more than LTL is an indication that carriers themselves are seeing weak demand.”

What’s more, freight moving in lanes carriers want and where their equipment is typically equates to good pricing, said Regan. But for what he called straggler—or orphan freight—that nobody wants, shippers pay a premium to have that freight moved and will pay more of a premium if it moves within service parameters that are outside the boundaries carriers are comfortable with.