Despite tonnage uptick, worries cloud freight outlook Fleet Owner

Despite tonnage uptick, worries cloud freight outlook

Despite a spike in for-hire truck tonnage increase in November and a healthy rebound in the housing market, a number of worries continue to cloud the freight market – especially where the so-called “fiscal cliff” is concerned.

“If the fiscal cliff isn’t fixed in time, expect a slowdown in tonnage early next year as paychecks shrink for all households,” noted Bob Costello, chief economist for the American Trucking Assns.(ATA). “Since trucks account for the vast majority of deliveries in the retail supply, any reduction in consumer spending will hurt.”

But even if the U.S. does not go over the fiscal cliff – meaning across-the-board tax increases and spending cuts don’t occur – Costello still expects slower tonnage growth in 2013 as improved housing starts and auto sales will be offset by slower factory output and consumer spending.

Eric Starks, president of research firm FTR Associates, echoed Costello’s projection, telling Fleet Owner that even if the fiscal cliff is solved truck tonnage would remain “sluggish” until the second half of 2013.

“If we don’t go over the fiscal cliff, it would not be until the second half of next year that we’d see any notable type of expanding freight demand,” he said.

ATA’s for-hire truck tonnage index jumped 3.7% in November – the index’s first gain since July – and erased October’s 3.7% drop. Compared with November 2011, the index is up 1%, after contracting 2.1% on a year-over-year basis in October. Year-to-date, compared with the same period last year, tonnage was up 2.8%, ATA said.

“[Hurricane] Sandy impacted both October’s and November’s tonnage readings,” ATA’s Costello added. “But it was still good to see tonnage snap back in November.”  He also expects a boost to flatbed tonnage from the rebuilding in the areas impacted by Sandy, but most of that won’t happen until the spring when the money starts flowing and the weather is conducive to building.

From a more global perspective, a still-sluggish freight environment is expected to be the norm for at least the near term, according to the Stifel Nicolaus Logistics Confidence Index (LCI).

Based on a monthly survey of international shippers and forwarders that measures freight activity across several European-based trade lanes, Stifel’s LCI – crafted in partnership with Transport Intelligence Ltd. – increased 0.6 points to 48 in December.

Stifel said that increase is favorable, yet the index readings notably remain below the 50 point threshold, indicating that the current environment continues to underperform normal expectations for this time of year. Also, despite positive traction in the current environment, expectations for the six-month market outlook have become slightly less optimistic, according to the firm’s survey.

Stifel added that current freight volumes continue to be stronger in European export lanes and weaker in European import lanes, which is not surprising given the difficulties seen in the European economies now.

But while results in its six-month outlook were mixed, with some contraction in expectations for Europe-Asia and Asia-Europe, there are improvements in the outlook for Europe-U.S. and U.S-Europe trade, the firm noted.

Domestic freight activity, however, is far more mixed at the moment. According to Cass Information System’s monthly freight index for November, North American shipment volumes were down 4% in November compared to October, with shipping expenditures down 5.8%. However, volumes were up 3.5% compared to November 2011.

The firm added that the transportation sector “continues to move ahead without gaining a lot of steam,” with volumes not growing fast enough to really put pressure on the system. Still, with the trucking industry, in firm’s words, at “virtually full employment,” even a small incremental jump in growth would generate a “crisis” for the trucking industry.

Jonathan Starks, FTR’s director of transportation analysis, fleshed some of those concerns out more fully by noting that his firm’s Truckers Conditions Index remains at a high level – 9.6 in September and 7.9 in October – and is projected to reach double digit readings by late spring.

“Regulations adversely affecting trucking’s capacity to haul, especially the new hours of service rules in the pipeline for implementation, will cause an ever-tightening condition,” he explained. “When we add in the expectation of further freight growth, we can see a possible crisis unfolding in late 2013 where there simply are not enough available hauling hours to meet shipping demands.” 

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