March Tonnage Rises 3.8% as Housing, Energy Rebound

This story appears in the April 29 print edition of Transport Topics.

Truck tonnage rose 3.8% in March from a year earlier, illustrating strength in the housing and energy sectors of the U.S. economy, American Trucking Associations reported.

ATA’s seasonally adjusted index rose to 123.5, capping a first quarter when tonnage increased a total of 3.9% over the first three months of 2013. This represents the biggest quarterly gain since the final quarter of 2011, when the index hit the highest level ever recorded: 124.3.

On a month-to-month basis, March tonnage was 0.9% above February, the fourth sequential gain in five months.

“Fitting with the expectation for solid gross domestic product growth in the first quarter, tonnage was strong in March and the quarter overall,” ATA Chief Economist Bob Costello said. His reference was to economists’ expectations of growth above the 0.4% mark in the fourth quarter.

Bloomberg News’ survey of analysts is forecasting 3% first-quarter GDP growth.

“The good news for tonnage is housing starts are growing and energy production is good — both of which generates heavy freight,” Costello said.

March housing starts were 47% above the same month last year, the Census Bureau reported.

In the energy sector, oil production is at a 2013 high, the Energy Department reported, and is 20% above 2012 levels. Oil production using the hydraulic fracturing process, or fracking, generates heavy loads such as water and sand.

ATA said its non-seasonally adjusted index also was strong, increasing 11.5% over February. On a year-over-year basis, that index rose to 125.2 from 123.2, a 1.6% improvement.

“March truck tonnage started the month slowly but rebounded in the back half of the month,” Peter Nesvold, an analyst for Jefferies & Co., said in an April 23 investor note. The trend was consistent with diesel fuel purchases his firm tracks, he said.

The tonnage index has moved up on the strength of heavy freight without a companion increase in freight volumes, Costello said.

“Tonnage is pretty significantly better than the number of loads,” he told Transport Topics. “I wouldn’t be surprised if the total number of loads for all equipment types was flat in the quarter,” Costello said, adding that the number of dry-van loads definitely will decline.

ATA is still calculating March load volumes for dry van and other freight equipment types, such as flatbed and refrigerated trailers. Those statistics will be released next month.

Costello’s assessment of the first-quarter van freight market was consistent with publicly traded and privately owned fleets, which reported uneven freight demand.

“Freight trends have been pretty erratic across the geographic markets thus far this year,” Richard Stocking, president of Swift Transportation, said in an April 23 commentary. “The volatility has been felt at different times throughout the year.”

The March freight growth pace isn’t likely to continue, Costello cautioned.

“Expect freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax refunds,” he said. “When consumers spend less, that will have a ripple effect on the economy.”

Comments from two of the largest truckload operators reinforced Costello’s view of a slowing market.

“Volume trends have been somewhat sluggish in the first two or three weeks here in April,” Stocking said.

Werner Enterprises Inc. said in its April 19 earnings announcement that this month’s freight activity so far was trailing the same month of last year.

Nesvold also said that April volumes are slower than March, based on anecdotal comments from fleets.

David Schrader, senior vice president of operations for TransCore, said the company’s DAT load board activity shows that April so far has been weaker than March, with indications more carriers are seeking loads than available freight.

“No one is out there beating their chests and saying everything is great,” he told TT. “Things are just happening at very middling levels.”

Freight levels are a bit lower than this time last year, Schrader said, because produce shipments that were brisk in March and April 2012 haven’t yet begun to peak. Part of the reason, he said, could be bad weather in some sectors of the United States.

Justin Yagerman, an analyst at Deutsche Bank, also stressed the year-to-year freight level differences due to weather.

“An unseasonably cold spring has likely constrained demand for seasonal items such as grills, charcoal, patio furniture and fertilizer,” his April 23 report said.

A report from Stifel, Nicolaus & Co. analyst David Ross before the ATA tonnage report also linked first-quarter freight trends to weather differentials, noting that demand for those outdoor products was pulled forward during last year’s mild winter.

February tonnage, initially reported as a 0.6% increase over January, was revised to a 0.7% sequential decline, ATA said.