ST. LOUIS — Want to know the economic outlook from freight’s perspective?
How about “on your mark, get set, wait.”
Both the shipments and expenditures indexes as reported by Cass Information Systems have now been positive for three months in a row.
Throughout the U.S. economy, there are a growing number of data points suggesting that the economy is getting better.
Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong, Cass officials said.
The 0.9 percent year-over-year increase in the March Cass Shipments Index is yet another data point which suggests that the first positive indication in October may have indeed been a change in trend.
In fact, it now looks as if the October Cass Shipments Index, which broke a string of 20 months in negative territory, was one of the first indications that a recovery in freight had begun in earnest.
Although the year-over-year change looks weaker than the 1.9 percent February year-over-year change, Cass points out that March 2016 was one of the least negative months for the shipments index and hence serves as a tougher comparison.
Data is suggesting that the consumer is finally starting to spend a little, albeit not with brick and mortar retailers, Cass said. It also suggests that, with the surge in the price of crude in October of last year, the industrial economy’s rate of deceleration first eased and then began a modest improvement led by the fracking of drilled uncompleted wells, especially in the fields with a lower marginal production cost.
“We have been questioning “how fast will the recovery from here be?’” Cass said in its report. “However, the overall freight recession, which began in March 2015, appears to be over and, more importantly, freight seems to be gaining momentum.”
Unlike in February, the March sequential pattern was less inspiring, Cass said.
“Instead it appears that January was well below trendline, February was well above, and March simply settled in near the true trendline (sequentially January down 6.4 percent, February was up 7 percent, and March was up 0.5 percent). Viewing the shipments index on a nominal basis (in the chart below) highlights that the data in general is getting better.
The Cass Freight Shipments Index — when viewed on a nominal year-over-year stacked basis—also highlights the general strength of the current number.
The Cass Freight Expenditures Index also continued to signal a turn in trend. Expenditures (or the total amount spent on freight) turned positive for the first time in 22 months in January, albeit against an easy comparison. Not since 2011—when the economy was still climbing out of the recession—had this index been so low.
The Expenditures Index in January 2016 was the worst in five years, as demand had weakened and crude oil had fallen below $30 a barrel.
Although February and March of 2016 were also weak, they were not nearly as weak as January 2016 and hence a slightly tougher comp, Cass said.
Cass officials said they continue to assert that the trucking industry provides one of the more reliable reads on the pulse of the domestic economy, as it gives us clues about the health of both the manufacturing and retail sectors.
“We should note that as the first industrial-led recovery (2009-2014) since 1961 came to an end, and the shift from ‘brick and mortar’ retailing to e-commerce/omni-channel continues, we are becoming more focused on the number of loads moved by truck and less focused on the number of tons moved by truck,” the Cass report said.
Tonnage itself appeared to be growing and gaining momentum (three-month moving average reached +2.49 on a not seasonally adjusted basis in January).
Unfortunately, February tonnage was -2.80% pulling the three-month moving average down to -0.13.