Industry’s lukewarm gains, moderate slowdowns could improve by midyear

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truck tonnage lukewarm
truck tonnage lukewarm
Trucking serves as a barometer of the U.S. economy, representing 71.4% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. (iStock Photo)

The amount of available freight hauled by the trucking industry grew in January, but not by much. That’s the consensus among industry analysts and forecasters.
American Trucking Associations (ATA) reported growth of 0.1% in its monthly, seasonally adjusted For-Hire Truck Index, the second consecutive month of increase. The index is compiled from data submitted by ATA member carriers and is based on year 2015 averages. January’s index of 117.4 represents a 17.4% increase over the 2015 data. Compared to January 2019, the index increased by 0.8%.
“Over the last two months, the tonnage index has increased 0.6%, which is obviously good news,” said ATA Chief Economist Bob Costello. “However, after our annual revision, it is clear that tonnage peaked in July 2019 and, even with the recent gains, is down 1.8% since then.”
Costello blamed softness in manufacturing and elevated inventories for the 2019 declines. Contract freight dominates the ATA tonnage data.
ACT Research also indicated growth in January with its For-Hire Trucking Index registering 53.9. For the ACT index, 50 is the baseline, so anything higher indicates growth while anything below 50 indicates decline. The index is compiled from answers to a monthly survey ACT sends to carriers and may include some carriers that are also ATA members.
The ACT index, like the ATA’s, showed two consecutive months of increase, with the larger increase coming in December.
A key difference in the ACT report is that a separate index is maintained for freight rates. The news on the rate front is not as cheerful, as ACT reported an index of 44.8, 10.4% below the “neutral” score of 50.
Capacity remains the culprit. The near-record Class 8 truck-buying spree in 2019 resulted in more available trucks, but freight volumes haven’t grown as quickly. With more trucks competing for freight, rates have been dropping for months in the spot market, and decreases are reaching the contract freight market, too. As freight levels continue to increase and truck sales have slowed, the freight market could soon return to something like equilibrium, according to many analysts.
“We see encouraging signs in improving volume and utilization trends that the freight downturn is in its late stages and the market will rebalance in 2020,” said Tim Denoyer, vice president and senior analyst at ACT Research. “The good news is that capacity additions have just stopped at the Class 8 tractor level, which we think will take pressure off rates as the year progresses.”
Similar news was reported from Cass Information Systems in its January report. The Cass Freight Index for shipments, which includes freight moving by rail, ship and other modes, dropped 9.4% from January 2019. The report notes that elevated inventory levels are partly responsible for the drop in shipments, usually a symptom of a slowing economy, as adjustments to manufacturing capacity lag behind sales.
Inventories could get some unexpected help from the unlikeliest of sources — the coronavirus. As overseas factories close their doors in response to illness or quarantines, inventories shrink when retailers sell off the stock on their shelves.
A release by the American Association of Port Authorities predicted cargo volumes at U.S. ports in the first quarter could be down by 20% or more from 2019 due to disruptions caused by the virus.
Cass maintains a Truckload Linehaul Index that measures per-mile linehaul rates in what Cass calls “the largest (and most fragmented) market in the domestic transportation landscape. This index showed a decline of 6.3% this January compared to last year, after falling 3.3% in December. The report blames loosened capacity (trucks coming back into service after being idle during the holidays) for the decline.
The news from industry analyst and forecaster FTR seems to point the economy in the same direction. A Feb. 24 blog entry by analyst Steve Graham said, “At the recent Stifel Transportation & Logistics Conference, the common outlook from industry executives was that supply and demand should find equilibrium around midyear, at which point spot rates should resume their premium to contract rates and give contract rates room to rise again in 2021.” Graham’s March 2 “Monday Morning Coffee” blog entry was titled, “The Coronavirus has Emerged as the Latest Economic Threat.” In it, Graham noted that stock prices were falling in markets worldwide as number of victims continued to grow.
The consensus from all sources seems to be that the current slowdown won’t last and that world economies — and the U.S. trucking industry — will be better off in the second half of the year.

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