January Tonnage Rises 2.6% on Contract, Spot Market Gains
This story appears in the Feb. 27 print edition of Transport Topics.
Truck tonnage rose 2.6% in January compared with the same month in 2016, reversing a decline in December, according to the monthly American Trucking Associations index.
Sequentially, tonnage improved 2.9% in January after falling 4.3% in December. Year-over-year, the index dipped 0.2% in December.
The preliminary seasonally adjusted tonnage index for January was 138.8 versus 134.9 in December. The record was 142.7, set in February 2016. The index uses a base level of 100 for freight activity in the year 2000.
“The freight economy is starting to show some signs of life, and January’s truck tonnage numbers are a good step forward,” ATA Chief Economist Bob Costello said.
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets, was 131.6 in January, which was 1.8% lower than the previous month.
The Market Demand Index, a measure of loading activity from Truckstop.com, was 16.4 in the seventh week of this year compared with 9.3 in the same period of 2016. The index for dry vans was up to 11.5 from 6.2, and refrigerated vans were up to 7.2 from 4.2. A number less than 15 denotes a market that favors shippers, and more than 20 equals a truckers market. The flatbed index was up to 33.1 from 18.8, a measurement in which 25 to 30 represents a neutral market.
However, FTR Chief Operating Officer Jon Starks told Transport Topics that the dry van market has been slowing down since the robust start in early January. FTR partners with Truckstop.com to produce the MDI.
“While demand is up about 45% year-over-year in the latest week, it has actually decelerated from the beginning of the year. Typically, the dry van market starts to accelerate this time of year,” he said. “Flatbed is also up 45% year-over-year, but it’s having a normal seasonality, starting to increase right now.”
His assessment is in line with what several trucking companies shared with investors at the 2017 Stifel Transportation and Logistics Conference in mid-February. Werner Enterprises Inc., which ranks No. 15 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, characterized January as positive.
“We felt pretty good in the first three weeks of January in some of the trends that we were seeing in terms of a bookings perspective and overall freight demand,” Werner CEO Derek Leathers said. “Since that third week of January and into February, things have softened some and are seasonally normal for February.”
But he added that it’s not a weak February or concerning to his company, just a “pause that we’re trying to better understand going forward.”
Eric Fuller, president of U.S. Xpress Enterprises Inc., told investors that the first quarter of 2016 was below average, but this winter has been above average. The Chattanooga, Tennessee, dry van carrier ranks No. 19 on the for-hire TT100.
“With a little bit above-average demand and volumes already in the first quarter, I think that’s going to continue to increase. We have enough tailwinds in the market from an economic perspective,” Fuller said.
PGT Trucking Inc. President Gregg Troian agreed that, while contract rates haven’t caught up to the spot market, demand surged in January. The Monaca, Pennsylvania, flatbed carrier ranks No. 96 on the for-hire TT100.
The preliminary FTR Trucking Conditions Index fell to 2.6 in January versus 9.1 in the prior year, but after excluding the changes in fuel prices year-over-year, it fell only to 3.6 from 5.5.
The ATA Truck Tonnage Index and FTR Trucking Conditions Index lean more toward contract freight, but the Truckstop.com index measures the spot market, according to the groups.
The Cass Freight Index Report on shipments dropped 6.4% sequentially but rose 3.2% on a year-over-year basis. Expenditures dipped 0.3% sequentially but increased 4.3% year-over-year in January. Cass uses information through a St. Louis bank from bill payments primarily based on trucking but also including rail, air and barge freight.
“In fact, it now looks as if the October index, which broke a string of 20 months in negative territory, was one of the first indications that a recovery in freight had begun in earnest,” wrote report author Donald Broughton, an analyst with Avondale Partners. “How fast will the recovery be from here? That is yet to be seen. However, the overall freight recession, which began in March 2015, appears to be over.”
Other economic indicators that influence freight conditions also were generally positive. The Institute of Supply Management manufacturing index, which measures new orders, inventory levels, production and the employment environment, rose to 56%, the highest level in two years. A reading above 50% shows that the industry was expanding.
The U.S. Department of Commerce reported retail sales rose 0.2% in January compared with December. The agency also said the inventories-to-sales ratio dropped to 1.35 from 1.38 in December, the latest month of available data.
“The decrease put inventories throughout the supply chain, relative to sales, to the lowest level in two years. There is no doubt that the inventory glut was a drag on truck freight volumes last year,” Costello said.
