June Tonnage Gains 2.3%

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

Truck tonnage rose 2.3% in June from last year, continuing a positive direction for freight that helped the year’s second quarter rise at a faster pace than the first quarter, American Trucking Associations said last week.

ATA reported that second-quarter tonnage rose 3.2% over the same year-ago period, 1 percentage point faster than the first quarter.

On a month-to-month basis, the index fell 0.8% in June from May and now stands at 128.6. Since a 10.1% year-over-year jump pushed tonnage to a record 131.0 in November, the growth pace has stumbled. But this year’s tonnage growth has ranged from 1% in January to 4.2% in April, with the June performance the second-smallest.

“June was one of those months where the data doesn’t quite match up with the anecdotal reports from fleets,” ATA Chief Economist Bob Costello told Transport Topics. “We’ve heard from many, many fleets that freight was good in June. Then the tonnage number disappointed. It could be that capacity continues to tighten up, and that’s why it ‘feels’ good to fleets.”

Among the carriers that cited strong demand was Knight Transportation Inc., which ranks No. 31 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.

CEO Kevin Knight observed that “overall demand remained strong while capacity appeared to tighten.”

His comments about market trends in last week’s second-quarter earnings report were echoed by other carriers (see related story, p. 5).

No. 10 Landstar System Inc. CEO Henry Gerkens characterized demand as “very strong,” as evidenced by 9% higher truck shipments.

Executives at private carriers, who spoke at a recent Cowen & Co. meeting, had a consistent view. “Tonnage is up and capacity is down, and that helps our industry,” one Southern carrier executive said. “Some of the shippers didn’t get all their freight out in June. We aren’t seeing shippers take two weeks off,” as they have done in past years.

“Freight growth is somewhat healthy, but there are month-to-month fluctuations,” said Eric Starks, president of consultant FTR. June, he said, was further evidence of cargo volume growth that bounces around in the 2-3% range. “In general, the freight environment is growing — modestly,” he added.

Starks said the tonnage growth pace was in line with recent U.S. economic performance.

“We are looking at a relatively healthy economic growth environment,” Starks said. “Manufacturing is continuing to expand.”

Starks said that positive indicators are being seen in markets such as lumber and automotive. He also said the latest employment report, while favorable, holds more promise for the economy if it leads to creation of full-time rather than part-time jobs.

The latest round of U.S. economic reports underscored the moderate growth theme.

The Labor Department reported that the nation gained 288,000 jobs in June, and the consumer price index increased 0.3% after a 0.4% gain in May. Purchases of existing homes rose 2.6%, the National Association of Realtors said.

Costello believes gross domestic product growth is headed toward at least 3.5% in the second quarter, based on retail sales growth in May and June.

Retail sales rose 4.5% year-over-year in the second quarter and 4.2% in June.

Factory output also has risen for five straight months, Costello said, and durable goods orders improved for key products such as fabricated metals and furniture.

“The economy and the recovery remain on track, neither too hot nor too cold,” Laura Rosner, U.S. economist with BNP Paribas in New York, told Bloomberg News.

ATA’s not seasonally adjusted index of actual freight hauled was 132.3, a year-over-year rise of 5.1% and a month-to-month drop of 0.5%.

Load board activity, another trucking indicator, remained elevated.

The Internet Truck Stop market demand index peaked in June but has backed off since then, with fewer trucks posted as available for loading and a concurrent drop-off in pricing this month.

“The MDI remains quite high by historical standards, but the index is returning to more normal ranges following the unprecedented highs seen in June,” Internet Truck Stop economist Jeremy West said in the company’s July 21 report.

“Demand remains strong, and rates are high on the spot market, despite a seasonal decline,” said DAT, whose load board activity increased 63% in June. DAT’s July 23 report noted that June spot van rates are 12% above last year at this time and are within a few cents per mile of records set in the past month.

Costello highlighted one area of freight that was stronger.

“LTL tonnage looks like it was better than TL tonnage in June [in percentage terms],” he said.

He added that less-than-truckload is a small percentage of total freight. ATA said it accounts for barely 10% of for-hire carrier tonnage.

The May tonnage index was revised slightly downward to 129.6 from 129.7 when reported on an advanced basis.