Out of the office (freight data) notes

Last week, I took a little time off due to school vacation week. But because I was off by no means translates into a vacation for all. That said, my e-mail in box was certainly still working, based on the inexorable deluge of e-mail coming through at all hours of the day and night.

Many of the items I received were notable and typically would merit individual news items of their own, but in the interest of getting caught up and moving forward, I thought it would be good to provide a brief summary of some of the key data-driven things that occurred while I was out of the office.

One thing that caught my eye was the always interesting Shippers Conditions Index (SCI) from freight transportation consultancy FTR, which it describes as an indicator that sums up all market influences that affect the transport environment for shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”

For December, the most recent month for which data is available, the SCI came in at -8.8, which is in line with November’s -8.9, which was down from, and an improvement over, October’s -9.6. September and August came in at -8.2 and -6.7, respectively.

FTR said that the most recent reading reflects how carrier capacity remains very tight, coupled with rates expected to continue to rise through the second quarter.

Needless to say, this reading portends ongoing difficulties for shippers at the moment, as observed by FTR COO Jonathan Starks.

In a statement Starks said: “The question for many shippers is how long will the tough times last? When we look at freight demand, which has been strengthening for nearly a year now, our forecast shows robust demand for most of 2018.  If there will be improvements for shippers, it won’t be because of a softening of freight. Truckstop.com’s Market Demand Index, at roughly twice the level that it was at this time last year, highlights the tight capacity situation within the spot market. It began rising again in February after softening following the strong holiday season. For shippers who haven’t locked in capacity, this year’s spring shipping season will be a tough one.”

It’s tough to argue that, and not many know the state of the market at any given time more than FTR.

Another key metric issued last week was the American Trucking Associations (ATA) Truck Tonnage Index for January.

The ATA’s advanced seasonally adjusted (SA) For-Hire index headed up 2% in January to 111.6 (2015=100) after a 0.3% December decline. While the sequential gain was somewhat modest, the annual gain was much more impressive, rising 8.8% and topping a 7.5% annual increase in December. ATA also observed that the SA saw a cumulative 3.8% gain for all of 2017.

The ATA’s not seasonally adjusted index, which the ATA said represents the change in tonnage actually hauled by fleets before any seasonal adjustment and the metric ATA says fleets should benchmark their levels with, was 0.4% ahead of December at 106.9 and was up 18.8% annually.

“Last month’s gain in tonnage fit with the anecdotal reports we have been hearing from fleets – that freight was solid in what is typically a softer month,” said ATA Chief Economist Bob Costello in a statement. “With the economy strong, the drivers of truck freight solid, and the inventory cycle in favor of motor carriers, I expect freight tonnage to remain robust in the months ahead.”

The third and final data item of note comes in the form of the Cass Freight Index Report. 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 ATA tonnage index at turning points, which lends to the value of the Cass Freight Index.

Both freight shipments and expenditures saw another month of annual growth in January, with shipments up 12.5% and expenditures up 14.2%.

If you are not sold on these beyond solid readings, consider this comment from the report’s author, Donald Broughton, managing director of Broughton Capital: “Volume has continued to grow at such a pace that capacity in most modes has become extraordinary tight. Pricing power has erupted in these modes to levels that spark overall inflationary concerns on the broader economy.”

Taking that a step further, the report added that shipments turned positive 16 months ago, with expenditures doing the same 13 months ago. And the report explained that volume in January was well above other recent years, including the very strong 2014, and it also noted that December 2017 volume topped all previous months prior to that, including a record month in October 2014, which preceded the industrial recession that began in December 2014.

While the FTR, ATA, and Cass data each have different perspectives and approaches, there is a common theme, which is simply a strong economy and a strong freight market. As always, this is good for some and not so good for others, but, to be clear, it beats the alternative (remember the dark days of 2009?).

Most estimates coming from analysts and company earnings reports indicate that conditions should remain strong for a while. How long? Who knows? But there is always the risk of overheating, too. Let’s see what happens.