November tonnage outpaces forecast

November’s freight tonnage numbers, as reported by the American Trucking Assns. (ATA) today, bettered the October forecast of analyst Peter Nesvold of Jefferies & Co. Inc

November’s freight tonnage numbers, as reported by the American Trucking Assns. (ATA) today, bettered the October forecast of analyst Peter Nesvold of Jefferies & Co. Inc.

“Seasonally adjusted truck tonnage increased 6.0% YoY in November vs. our 3% to 5% forecast and +5.7% YoY in October,” Nesvold said in an emailed statement.

He went on to state that Jefferies views the ATA truck-tonnage index “as a leading economic indicator, as well as a good proxy for overall truck conditions. The positive truck tonnage readings are consistent with our recent channel checks that truck fundamentals continue to improve. Our channel checks suggest that truckload supply and demand remain fairly balanced and that the strength in volumes has continued into December” for that segment, he added.

Nesvold noted that the seasonally adjusted (SA) truck tonnage was “up 6.0% YoY in November (vs. our estimate of +3% to +5% and +5.7% YoY in October). On a not-seasonally adjusted (NSA) basis, tonnage increased 6.5% YoY in November (vs. +4.8% YoY in October and +6.1% YoY in September). In November, ATA’s truck tonnage index, which includes data from truckload and less-than-truckload carriers, increased at its fastest YoY pace in five months and was in line with the robust retail sales figures from this year’s Thanksgiving Day holiday weekend. Our tonnage forecast range for full-year 2011 started at +3% to +5%. Year-to-date, tonnage is up 5.4% YoY — modestly above the high end of our expectations.”

Further, Nesvold advised that the current trends in tonnage closely resemble a “typical” truck cycle. “We compared this current tonnage cycle to our truck composite model, which aggregates truck tonnage data over the past 40 years, and we found that this tonnage cycle has been unremarkable in a historical context. Based on how devastating the ‘Great Recession’ was, we expected to see huge swings in truck tonnage relative to the ‘typical’ tonnage cycle. What we found, however, is that this tonnage cycle has been in line with historical trends. Furthermore, the current truck cycle is 97% correlated with our truck composite model.”

He also pointed out that the Cass Freight Index dropped 2.9% YoY in November. “Cass Information Systems processes over $17.5 billion in freight invoices each year,” Nesvold explained. “The Freight Shipments Index is based on Cass’ diverse customer base, which includes 1,200 divisions of 400 unique companies. The Freight Shipments Index, which is one of the many freight indicators that we track, reflects shipments by various modes of freight transportation, including trucking, rail, and air.

“The Cass Freight Shipments Index decreased on a YoY basis for the first time in 21 months, falling 2.9% YoY in November (vs. +2.2% YoY in October and +7.5% YoY in September),” he continued. “Additionally, it currently stands at a nine-month low of 1.056 (January 1990=1.0), down from 1.081 in October. We believe that the latest weakness in the Cass index is reflecting the overall slowdown in airfreight (and to a lesser extent ocean) volumes.”

Nesvold noted that in its latest report, Cass stated: “Freight shipments and payments both declined in November for the second straight month. Although retailers reported record sales for Black Friday, those products had been shipped and stocked earlier in the year and did not contribute to November shipment volume.”

And he added that Cass also highlighted that truck capacity remains tight: “The trucking industry appears to be reaching capacity, which does not bode well for 2012. Rates are expected to rise significantly and finding a truck could be difficult.”
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