More slow but steady growth in tonnage

June 1, 2010
A slow yet steady increase in freight tonnage, coupled with an earlier-than-expected tightening of truck capacity, is making analysts more confident that the trucking industry is on the road to recovery

A slow yet steady increase in freight tonnage, coupled with an earlier-than-expected tightening of truck capacity, is making analysts more confident that the trucking industry is on the road to recovery.

The American Trucking Assns. (ATA) said its for-hire truck tonnage index increased for the sixth time in the last seven months, gaining another 0.9% in April, following a 0.4% increase in March. Year-to-date, tonnage is up 6% compared with the same period in 2009, the ATA reported.

“Truck tonnage volumes continue to improve at a solid, yet sustainable, rate,” said Bob Costello, ATA chief economist. “Tonnage is being boosted by robust manufacturing output and stronger retail sales [which] fits with a sustained economic recovery.”

“These numbers are right in line with our projections for the freight market; things are behaving as we expected,” Eric Starks, president of research firm FTR Associates, told FleetOwner. “The one thing that’s happening sooner than we expected is a tightening of [trucking] capacity. We originally thought that would occur in late 2010; instead, it’s happening now.”

As a result, Starks said he’s “getting pretty bullish” about the freight sector based on the numbers he’s seeing. That confidence is derived in part by improvement in other economic metrics that directly affect freight volumes.

For example, the Institute for Supply Management’s (ISM) said that while its Purchasing Managers Index (PMI) registered 59.7%, a 0.7 percentage point decrease when compared to April’s reading of 60.4%, anything in excess of 42% over a period of time generally indicates an expansion of the overall economy.

“The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (58.9%) corresponds to a 5.7% increase in real gross domestic product (GDP),” said Norbert Ore, ISM chairman. “In addition, if the PMI for May (59.7%) is annualized, it corresponds to a 6% increase in real GDP annually.”

More importantly for trucking, ISM said its data indicates manufacturing inventories contracted in May for the second consecutive month as the group’s inventories index registered 45.6%, which is 3.8 percentage points lower than the April reading of 49.4%.

This is important as lower inventory levels often lead to higher freight demand, as companies across the economy seek to restock their supplies.

“This is good stuff,” noted FTR’s Starks.

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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