Continued growth is intact in May edition of Cass Freight Index Report

The May edition of the Cass Freight Index Report from Cass Information Systems followed the path of April, with another solid performance.

The Cass Freight Index accurately measures trends in North American shipping activity based on $23 billion in paid freight expenses of roughly 350 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.

May freight shipments—at 1.173—were up 3.6 percent annually and 1.0 percent better than April in reaching its highest level since October 2011. Shipments also increased for the fourth straight month and are up 26.4 percent higher than shipment levels at the end of the recession in 2009.

And shipments remained above the 1.0 mark for the 46th consecutive month, when shipments moved above the 1.0 mark for the first time since November 2008. The report noted that both trucking and rail carriers are dealing with capacity-related issues as volumes in each sector grow. It also cited that government regulations, which are hindering productivity, are having a continuing effect on the driver shortage which, in turn, has further limited capacity while there is strong growth in truck fleet size this year.

Expenditures headed up 11.2 percent annually in May to 2.649 and were up 1.1 percent over April. This reading stands as a record high, and the report observed that freight spend is up 77.7 percent since the end of the recession in 2009.

Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, wrote in the report that while freight rates are not yet showing the full effect of tightening capacity, it is unlikely that the situation will continue.

“New equipment and drivers have been added to the trucking fleet, and both are increasing costs substantially (the driver shortage is pushing up the cost of recruiting, training, and retaining drivers),” wrote Wilson.

She also said that going back to the beginning of the year freight expenditures are up 11.0 percent, which is below the 13.1 percent shipment increase over the same period, and indicates a competitive rate environment is intact, coupled with a fluctuating spot market in recent months and serves as a “good indicator” of the sporadic nature of capacity issues.

While the 1.0 percent first quarter GDP figure was very underwhelming, Wilson said it was largely due to a substantial drop in business inventories, sluggish exports, and weather-related conditions. She explained that while economic performance for the quarter was weak overall, freight continued to gain momentum and has accelerated in the second quarter, adding that the downward GDP revision does not represent a harbinger of things to come.

“The health of the freight market is a very good indicator of the direction in which the economy is going,” wrote Wilson. “All indications point to moderate growth in freight over the next couple of months, which will bode well for the economy in general.”

A noted freight transportation expert agreed with Wilson that sustained growth is key, but it needs to be demonstrated over a consistent duration.

“The indicators that would be most telling, and reassuring that a stable recovery is truly occurring, would be a couple of positive months, and perhaps quarters, of even anemic growth in Cass’s numbers,” said Charles W. “Chuck” Clowdis, managing director, Transportation Advisory Services for IHS Global Insight. “The economy is far from being in a ‘sprint mode’ but the continued ‘limping along’ indicates some unstable underpinning in primary growth drivers.”