truckhwy Photo: Sean Kilcarr/Fleet Owner

ATA: Tonnage increased in October

Trade group said that indicates freight market is getting stronger.

The for-hire truck tonnage index compiled by the American Trucking Associations (ATA) increased 3.3% in October after dropping a revised 1.9% in September. Originally, ATA said its tonnage index declined 0.9% in September.

Compared with October of last year, the index is up 9.9%, which the trade group said is the largest year-over-year increase since December 2013. Year-to-date, compared with the same ten months in 2016, the index is up 3.1%, ATA added

“Continued improvement in truck tonnage reflects a much stronger freight market,” noted Bob Costello, ATA’s chief economist, in a statement. “This strength is the result of several factors, including consumption, factory output, construction and improved inventory levels throughout the supply chain. Additionally, the 6.7% rise in tonnage over the last four months suggests to me that retailers are expecting a good holiday spending season.”

John Larkin – managing director and head of transportation capital markets research for Stifel Capital Markets – added in a recent research brief that with the brunt of the e-commerce surge about to be unleashed and with supply and demand already tight, “get ready for wild and wooly fundamentals” for the rest of 2017.

“Amazon, and e-commerce in general, is growing at about 30% per annum, so the forthcoming holiday surge should require something on the order of 30% more freight transportation capacity to support the e-commerce market growth,” he said. “And with most carriers completely sold out already and a driver shortage that continues to mount, where will the seasonal surge capacity come from? That is the big question for the period between Black Friday and Christmas.”

Larkin said spot rates will certainly spike even more than they have, as spot rates are up 15% to 25% sequentially from August through October, according to Stifel’s data.

“And contract rates will continue to be adjusted upward on the order of mid-single digits to as much as low double digits,” he stressed. “We believe FedEx, UPS, Wal-Mart, and Amazon will be ‘screaming’ for capacity and will, undoubtedly, have to pay big premiums to shake loose sufficient peak season capacity in order to avoid stock-outs and to meet ever more demanding customer expectations.

TAGS: News Economics
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