Despite a decline in the August Truck Tonnage numbers, there is some positive news showing up among the latest economic reports for the industry.
The American Trucking Assns. (ATA) reported a slight decline in the August Truck Tonnage Index. The Index fell 0.2%, the second consecutive month of decline after dropping a revised 0.8% in July. July’s revised figure is less than the 1.3% ATA reported on Aug. 23. The latest drop places the seasonally adjusted (SA) index at 114.4 (2000=100) in August, down from July’s 114.6.
The not seasonally adjusted index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, equaled 123.8 in August, which was 10.9% above the previous month. Compared to August 2010, SA tonnage is 5.2% higher, ATA said, and the tonnage index is 4.5% above a year ago.
“Freight has been going sideways for much of this year, but it isn’t falling significantly either, which suggests the U.S. economy just might skirt another recession,” ATA chief economist Bob Costello said.
At the same time, the Cass Freight Shipments Index increased 4.4% year-over-year in August. The Cass Index, compiled by Cass Information Systems, is based on freight invoices covering 1,200 divisions of 400 companies and includes rail, trucking, and air shipments.
In its latest report, Cass reported the index declined in August when compared to July’s 11% year-over-year growth and June’s 5.3%.
“Truck capacity shortages continue to be reported, although the problems are not widespread. Load boards used to match trucks with loads to be moved reported a drop in available capacity during the month,” Cass said.
Also up 0.4% year-over-year in August was the Ceridian-UCLA Pulse of Commerce Index, which is reported by the UCLA Anderson School of Management. Based on U.S. diesel fuel purchases, the PCI slid from July’s 1% growth.
According to Costello, the current tonnage levels are equivalent to late 2006 figures, yet the number of trucks operating is down about 12%. This, along with difficulties carriers are having recruiting new drivers, is keeping capacity in check.
“Both our channel checks and ATA’s commentary suggest that TL supply and demand remain fairly balanced despite a weak peak shipping season and post-S&P downgrade macro concerns,” said Peter Nesvold, an analyst with Jefferies & Co.
Nesvold pointed out that the 5.2% year-over-year increase exceeds Jefferies forecast of 3-5% growth. He noted that despite the weak economy, he still expects full-year 2011 tonnage growth of 3-5%.
“The latest acceleration in truck tonnage is a step in the right direction; however, we believe that volumes are likely to remain muted into a fading macro backdrop,” Nesvold said.
Jefferies also said that this recovery and current tonnage volumes remain in line with historical models.
“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,” Nesvold said. “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.”
While tonnage is moderating, rates are doing the same. According to the Third Quarter 2011 Transport Capital Partners (TCP) Business Expectations Survey, 60% of carriers say their average rates have risen in the past three months. That is down from 83% who reported rate increases in the second quarter.
“The weak GDP in the first half slowed freight demand, but the 15 to 20% cut in fleet capacity in the past few years still has carriers in a strong position,” said Richard Mikes, TCP partner.
One-third of carriers reported no change in rates, TCP said.
“TCP sees the fleet capacity remaining stable with most new trucks replacing older ones and recent registration numbers show a slight decrease in licensed Class 8’s,” said Lana Batts, TCP partner.
There is good news for carriers as 68% expect to renegotiate accessorials, including detention times (mentioned by 42%), fuel surcharges (39%), and quicker payments (26%). Since the first quarter, three times as many carriers are planning to renegotiate from “short” miles to “practical” miles in rate setting.
“Short miles are a hangover from the regulated era of three decades ago and do not reflect current realties of miles ran, fuel consumed, scarce driver hours used, and equipment utilization,” Mikes said.
“Accessorials have historically not garnered as much attention (with the exception of fuel surcharges), but today’s environment is recognizing that all directly are tied to real carrier costs and capacity stretched to the limit,” Batts added.