Carriers envision rate increases as tonnage rises

Sept. 24, 2013

Truck tonnage is rising and so are the hopes of carriers for rate increases, according to data released by two industry experts yesterday.

The American Trucking Assns. (ATA) reported truck tonnage increased in August after dropping in July. The advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.4% following a 0.6% adjusted drop in July, ATA said.

The one-month gain is the largest since May.

In August, the SA index equaled 126.9 (2000=100) versus 125.2 in July. Year-over-year (YoY), the increase is 6.9%, the largest YoY gain since December 2011. Year-to-date, the tonnage index is up 5%, ATA added.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, equaled 131.3 in August, which was 1.5% above the previous month (129.4).

“The strength in tonnage continued again in August, with the index increasing in three of the last four months,” said Bob Costello, ATA chief economist. “The improvement corresponds with a solid gain in manufacturing output during August reported by the Federal Reserve last week.”

Costello cautioned, though, that the recent increase might be more reflective of individual sector growth rather than a general economic boom.

“Tonnage’s strength in recent months, and really through 2013, is probably overstating the robustness of the economy and trucking generally,” Costello said.  “It just so happens that the sectors of the economy that are growing the fastest - in housing starts, auto production, and energy output, primarily through hydraulic fracturing - produce heavier than average freight, leading to accelerated growth in tonnage relative to shipments or loads.

“Truckload industry loads have accelerated the last few months, but are flat for the year, while less-than-truckload shipments are up less than 1.5% in 2013,” Costello added.

While ATA is reporting some growth in volumes, a new survey from Transport Capital Partners (TCP) is showing optimism among carriers for volume and rate growth.

The third-quarter Business Expectations Survey found that carriers, in general, expect volumes to increase over the next 12 months. In fact, 61% overall expect an increase versus just 50% in the third-quarter 2012 survey. Larger carriers (those grossing more than $25 million per year) are more optimistic than their smaller brethren – 68% vs. 45%.

“Spot market trends over the summer have been positive for most carriers and this may be the precursor to continuing volume optimism,” said TCP partner Richard Mikes.

Larger carriers also expect rate growth, with 74% anticipating improving rates over the next 12 months. In all, 66% of carriers (48% of smaller carriers) expect rate growth. But, TCP noted, this is a reversal as smaller carriers had expressed more optimism over rates in previous surveys.

Even as carriers anticipate rate and volume increases, though, actual increases have yet to materialize across the board, TCP said, with growth only showing in construction, petroleum and seasonal freight.

“Underlying cost rate pressure is ongoing - from new truck costs and maintenance inflation to pinched driver efficiency from HOS changes and inadequate carrier returns,” Mikes said.

Mikes pointed out that more than half of all carriers have expected rates to increase for 15 consecutive quarters, but actual rate increases have been slow to follow. In February of this year, only 26% of carriers reported increases, but that was up from 18% in the previous quarter.

That number is well below last year when 42% of surveyed carriers had seen rate increases, TCP said. This quarter, more smaller carriers (36%) experienced rate increases than larger carriers (20%).

“The stronger than expected volumes of the last few months are being reported by some carriers as boding well for the fourth quarter,” according to the TCP partners.

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