December Truck Tonnage Tops 2012

This story appears in the Jan. 28 print edition of Transport Topics.

Truck tonnage fell 2.3% in December from an all-time high the same month a year ago, but freight levels were strong enough to offer at least some short-term market optimism, American Trucking Associations reported.

The decline in ATA’s advance seasonally adjusted index to 121.6 was cushioned by the fact that it was being compared with a record level of 124.4 in December 2011.

On a month-to-month basis, the index rose 2.8% from November, which followed a 3.9% rise from October.

“December was better than anticipated, in light of the very difficult year-over-year comparison,” ATA Chief Economist Bob Costello said, referring to the December 2011 record.

Even though it trailed the year-ago level, the December index reading was the highest of 2012.

Costello said the month-to-month improvement was “a significant change” and in line with other favorable economic reports.

“Several indicators were better than expected in December — not just truck tonnage — including, manufacturing, retail sales and housing starts,” he told Transport Topics. “All of these would have helped truck tonnage during the month.”

Those increases included a 0.8% rise in factory output, the Federal Reserve said. In addition, the Census Bureau reported December housing starts rose to a rate of nearly 1 million annually, capping the best year since 2008.

The month-to-month growth was encouraging from another perspective, Deutsche Bank analyst Justin Yagerman said in a report, because it topped the average month-to-month increase of 1.6% over the past five years.

“Some of the sequential strength may have been due to issues at the U.S. ports, as well as a potential inventory build at discount retail stores,” Yagerman said in the Jan. 22 report.

His reference was to possible shipments in advance of a threatened East and Gulf Coast port strike that was averted by a last-minute contract extension.

Another freight indicator, the DAT North American Freight Index from load board operator TransCore, was positive in December. Its freight volume rose 5% from the year earlier, reaching the highest level for that month since 1996.

“A lot of that growth had to do with the dislocation we have seen in East Coast freight markets that was tied to Sandy,” said David Schrader, senior vice president of operations at TransCore. “When you have extreme events and significant dislocations in a particular market, a lot of freight flows into the spot market.”

The higher load board volume, Schrader said, has continued since the storm disrupted freight shipments at the end of October. He said shippers tend to use the spot market more after a storm because their supply chains are disrupted.

Overall, ATA classified 2012 as “a weak year,” with 2.3% annual tonnage growth.

That performance trailed the brisk 5.8% pace the previous two years, when U.S. economic growth was stronger during the early stages of the recovery.

The unexpected month-to-month improvement in December shouldn’t be viewed as an indicator of this year’s trends, Costello said.

He also told TT he expects tonnage growth for all of 2013 to lag last year’s performance.

“As paychecks shrink for all households due to higher taxes, I’m expecting a weak first quarter for tonnage and the broader economy,” Costello said. “Since trucks account for the vast majority of deliveries in the retail supply chain, any reduction in consumer spending will have ramifications on truck tonnage levels.”

Yagerman echoed Costello’s view that the first quarter likely will be weak, because consumers have less available cash after the U.S. payroll tax boost.

Others were more optimistic.

“Tonnage should receive a boost in the coming months due to the cleanup and rebuilding efforts in the Sandy-impacted areas,” said Jefferies & Co. analyst Peter Nesvold, citing comments from carrier contacts.

Schrader also said that elevated shipment levels on the spot market could continue early in 2013, based on the freight trends after Hurricane Katrina hit New Orleans in 2005.

During the first half of January, TransCore’s stronger-than-normal freight trend continued, with shipment levels 30% above the same period in 2012, Schrader said.

ATA’s non-seasonally adjusted index, a measure of tonnage actually hauled by the fleets, stood at 110.3 in December, 4.9% below the previous month and 5.2% less than in December 2011.