Transport tonnage and shipment reports indicate that the U.S. economy is recovering from heavy winter weather in January and early February, with economists remaining optimistic about gains – even if slight – in the U.S. economy during 2014.
The American Trucking Associations’ Truck Tonnage Index was up 2.8% in February after a 4.5% decline in January. For the first two months of 2014, the index is up 2.3% compared to the same period in 2013.
The not-seasonally adjusted index, which represents the real change in tonnage hauled by the fleets, was 4.5% below the previous month.
“It is pretty clear that winter weather had a negative impact on truck tonnage during February,” ATA Chief Economist Bob Costello said in his report. “However, the impact wasn’t as bad as in January because of the backlog in freight due to the number of storms that hit over the January and February period.”
Apart from weather disruptions, Costello said economic conditions look good for the U.S. trucking industry.
“The fundamentals for truck freight continue to look good. Several other economic indicators also snapped back in February. We have a hole to dig out of from such a bad January, but I feel like we are moving in the right direction again. I remain optimistic for 2014,” Costello said.
Trucking serves as a barometer of the U.S. economy, representing 68.5% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, according to the ATA. Trucks hauled 9.4 billion tons of freight in 2012. Motor carriers collected $642.1 billion, or 80.7% of total revenue earned by all transport modes.
An industry report from Baird is also optimistic about the industry, noting that February numbers show a 3% year-over-year growth in freight rates. The growth was above Baird expectations. The report also noted that many trucking and transportation companies may show first quarter losses because of the weather issues.
“However, we expect outlooks to be very constructive given better-than-expected core pricing growth and the likelihood of solid freight volume trends in upcoming months after severe weather disruptions (presumably) normalize,” Baird noted in its report on the truck, intermodal and rail sectors.
The Cass Freight Index also showed freight activity in February recovering from the January disruptions. February shipments were up 7.3% compared to January, but were down 0.4% compared to February 2013. Total expenditures on freight reversed a two-month decline with an increase of 6.8% in February. The expenditures index was up 6.4% from this time last year, 15.8% from February 2011, and was the highest February gain for the Cass index.
Rosalyn Wilson, a supply chain expert and senior business analyst with Vienna, Va.-based Delcan Corp., has said ongoing trends between shipments and rates indicate potential price inflation for the consumer.
“Expenditures have grown at a faster rate than shipment volume, and the economy has yet to feel the rate increases that should be coming later this year when capacity tightens and carriers take back the reigns for rate control,” Wilson noted.
Her optimism about the economy was “uttered with an abundance of caution and recognition that there are still many potholes to deal with.” Following are other notes from Wilson about economic conditions.
• There are still some strong headwinds to overcome in the freight sector, the most obvious being the nearly imperceptible growth in volumes.
• The global marketplace remains weak, so exports are lagging expectations.
• While unemployment continues to fall, the number of new jobs created each month is not enough to sustain the economy. As the Federal Reserve reduces its bond purchases, interest rates will continue to rise, which will have repercussions in the freight sector.
• The inventory levels that are now higher than our previous crisis level, when carrying costs were minimal, will become more burdensome and probably lead to a drawdown similar to that during the recession.
• Trucking capacity is at exactly the right level for the existing volume of freight, but will quickly be inadequate later this year if the predictions of a robust 2014 materialize. Obtaining credit to purchase new vehicles will become tighter, probably squeezing out smaller and marginal trucking companies that don’t have the capital to expand their fleet, or almost as important, modernize their fleets. Continue to expect a bumpy ride.