Little worry over slippage in tonnage for now

Little worry over slippage in tonnage for now

A 0.4% drop in the for-hire truck tonnage index compiled by the American Trucking Associations (ATA) for July isn’t generating too much cause for concern at this point as freight volumes are expected to remain solid for the second half of the year.

“After gaining a total of 2.2% in May and June, it isn’t surprising that tonnage slipped a little in July,” explained Bob Costello, ATA’s chief economist. “The decrease corresponds with the small decline in manufacturing output during July reported by the Federal Reserve last week.”

[Click here to watch Costello break down ATA’s July tonnage index numbers.]

July’s decline in tonnage is the first since April, Costello noted, and year-to-date compared with the same period in 2012 the ATA’s tonnage index is up 4.7%.

“Despite the small reprieve in July, we expect solid tonnage numbers during the second half of the year as sectors that generate heavy freight, like oil and gas and autos, continue with robust growth,” he added.

Yet Costello cautioned that while home construction generates a significant amount of tonnage, as mortgage rates and home prices rise, growth in housing starts will decelerate slightly in the second half of the year.

He also noted that tonnage gains in the second half of the year are likely to overstate the strength in the economy as these heavy freight sectors continue to outperform the economy overall.

”But still [it] will be a positive for truck freight volumes,” Costello stressed.

Similar confidence is being reflected in a number of U.S. sector surveys. According to the CFO Quarterly Global Outlook Survey conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business, CFOs maintain a more positive perspective as they enter the second half of 2013 than they did previously, especially towards hiring and employment opportunities.  

The survey, which polls CFOs of public and private businesses in the U.S., reported that the “quarterly optimism index” for U.S. CFOs toward their own businesses increased three points to 70.7 in the second this year from 67.1 in the first quarter, while confidence toward the U.S. economy improved to 61.2 from 58.5 – with nearly half of all respondents (49%) indicating they believe the U.S. economy to already be in the midst of a recovery.

In the next 12 months, CFOs anticipate an 11% increase in net earnings and an eight percent increase in revenue, added Linda Allen, professor of economics and finance at the Baruch’s Zicklin School of Business.

"The results of this quarter's survey show that overall economic confidence among financial leaders in the U.S. has improved," she pointed out. "Particularly encouraging is the attitude towards hiring: 61% of CFOs plan to hire within the next six months, and employee compensation is expected to increase by 3.5%."

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