A healthy rise in retail sales, which followed a small but noticeable increase in disposable income rates and consumer spending, helped give freight volume a significant boost in November this year – a trend some trucking experts believe bodes well for tonnage levels in 2010.
The American Trucking Associations’ (ATA) for-hire truck tonnage index increased 2.7% in November, following a 0.2% contraction in October. Though freight volumes were 3.5% lower when compared to November 2008, Bob Costello, ATA’s chief economist, said that was actually the best year-over-year showing in twelve months. For example, in October, the index was off 5.2% from the same month in 2008.
“Slowly, but surely, truck freight has started the recovery process and November’s solid increase is a very positive sign,” Costello noted. “November’s tonnage levels were pushed higher by improved economic activity, as well as by an inventory correction that is near completion. Truck freight had been hurt by both slow economic output and bloated inventories; however, we now have evidence that the inventories are in much better shape, which will not be such a drag on truck freight volumes.”
Part of the reason for November’s tonnage increase is an uptick in consumer spending. The Commerce Department’s U.S. Census Bureau said actual retail sales rose 1.3% in November this year, compared with a projected increase of only 0.7%. Excluding volatile motor vehicle and gasoline, overall retail sales rose 0.6%, the fourth consecutive advance, the Census Bureau said.
The rise in retail sales corresponds to an increase in personal income and outlays in November, according to the Commerce Department’s Bureau of Economic Analysis. Personal income rose 0.4% in November, with real disposable personal income increasing 0.2% and real personal consumption expenditures advancing 0.2% – even as the savings rate for the month remained unchanged at 4.7%.
“Consumer spending continues to expand in the fourth quarter of this year in sharp contrast with the declines a year ago,” noted Commerce Under Secretary Rebecca Blank. “Disposable personal income is growing this quarter as well. Consumers appear to be spending carefully while improving their financial positions by reducing debt. These trends provide a favorable base for further growth in the coming year.”
It’s a trend being reinforced by growing confidence among U.S. consumers as well. The Conference Board reported that its Consumer Confidence Index rose to 52.9 this month after increasing to 50.6 in November. Based on a representative sample of 5,000 U.S. households, Lynn Franco, director of The Conference Board’s Consumer Research Center, said the survey indicates moderate gains in consumer confidence are continuing.
“A more optimistic outlook for business and labor market conditions was the driving force behind the [recent] increases,” Franco noted. “Regarding income, however, consumers remain rather pessimistic about their short-term prospects and this will likely continue to play a key role in spending decisions in early 2010.”
That’s also why ATA’s Costello remains cautious about the future of tonnage for truckers. “While the economy and trucking is improving, the industry should not get overly excited about the sizeable increase in November,” he said. “I continue to believe that both the economy and truck tonnage will exhibit starts and stops in the months ahead, but the general trend should be for moderate growth.”