October Tonnage Dips 2.1%
This story appears in the Nov. 26 print edition of Transport Topics.
Total U.S. truck tonnage in October dropped 2.1% from year-ago levels, the first year-over-year decline since 2009, according to American Trucking Associations, which placed much of the blame for the decline on Superstorm Sandy.
The freight-dampening effect of the storm cut month-to-month tonnage by 3.8% in October from September, pushing down ATA’s seasonally adjusted tonnage index to 113.7.
That ended a year-over-year growth streak that began in December 2009 as the recession was unwinding, the federation said on Nov. 20.
“Clearly, Hurricane Sandy negatively impacted October’s tonnage reading,” said Bob Costello, the federation’s chief economist, emphasizing that other factors also affected the results.
“Excluding the hurricane impacts, I still think truck tonnage is decelerating along with factory output and consumer spending on tangible goods,” he said.
Tonnage levels now have worsened for three consecutive months, ATA reported, in both year-to-year and month-to-month comparisons, and are just 2.9% ahead of 2011 for the year to date.
Sandy’s precise effects on tonnage cannot be determined, Costello told TT, until early December, when ATA compiles data on actual loads that carriers moved. Part of the reason for the tonnage drop was lower fuel shipments to customers in the storm’s path. Costello explained that fuel had a pronounced effect on tonnage because it is heavy freight.
Comments on Nov. 7 by Old Dominion Freight Line Inc. illustrated Sandy’s effects on tonnage. CEO David Congdon said at a conference that his company’s October tonnage rose just 4%, as much as 2 percentage points below the company’s projections.
Weakening tonnage moved in concert with a 0.4% drop in October industrial production that the Federal Reserve reported on Nov. 16.
That report showed a 0.9% drop in manufacturing, all of it from the effects of Sandy, the Fed said. Manufacturing accounts for 75% of all industrial output, and the storm affected production of chemicals, food, transportation equipment, computers and electronic products.
“Manufacturing is pretty much treading water,” Joshua Shapiro, chief U.S. economist at consulting firm Maria Fiorini Ramirez Inc. told Bloomberg News. “There’s soft domestic demand and weakening export demand. The overall trend hasn’t changed much, regardless of the storm.”
While the October number was weak, some pickup in tonnage can be expected in the months ahead as freight delayed by the storm and items used for rebuilding are hauled, said James Meil, chief economist for Eaton Corp. He projected that rebuilding would add a few tenths of a percentage point to U.S. economic activity.
Meil said sales lost because of the storm could be made up.
“There is enough of the fourth quarter left that you can recap those [delayed] sales,” he told TT, although he was concerned that consumers in Sandy’s path may be more cautious about making substantial purchases than they were before the storm.
Costello agreed.
“I’d expect some positive impact on truck tonnage as the rebuilding starts in the areas impacted by Sandy, although that boost may only be modest in November and December,” Costello said.
Meil said the uncertainty about federal fiscal policy also was a key factor in recent trucking trends.
“There is just enough nervousness out there for companies” to be reluctant about production and investments as Congress debates tax and spending cuts, Meil said.
“With that somewhat clouded future, there is not as much investment as there could be,” he said.
But Meil also cited some positive indicators.
“There are a host of things that are OK,” he said. “The economy is OK — not great, but not bad. The momentum for retail seems to be OK — not great, but not bad.”
Housing, he said, is looking better, independent of any storm rebuilding factors.
The latest examples were a 2.1% rise in existing home sales in October, which the National Association of Realtors announced Nov. 19, the same day that the National Association of Home Builders’ housing-market index rose 12%.
While Meil expressed caution about the rest of 2012, he backed an economic forecast for 2% growth next year.
He compared that level of economic growth to a 2.0 grade-point average for a college student, saying, “It’s a passing grade that gets you by, but it causes concern for the parents who are paying the tuition bill.”
“Demand is just so-so,” Avondale Partners LLC analyst Donald Broughton told TT on Nov. 13. “That’s troubling because, if the slowdown in demand continues, that is indicative of a contracting economy.”
ATA’s report also said that September tonnage, previously pegged at a 0.1% increase over August, was revised to a 0.4% decline.
Tonnage that wasn’t seasonally adjusted reached 123.7 in October, or 4.4% above that month last year.