Tonnage Rises 3.4% in May

By Rip Watson, Senior Reporter

This story appears in the June 23 print edition of Transport Topics.

Truck tonnage rose 3.4% last month, driven by broad-based growth in all sectors of the trucking industry and an improving economy overall, American Trucking Associations reported.

The federation’s advanced seasonally adjusted index reached 129.7 in May and climbed 1% on a sequential basis, moving closer to the all-time high of 131 set in November.

Though saddled by weather-related declines earlier this year, tonnage has increased 2.9% for the year and increased in four of five months.

“I’m pleased at the direction of freight,” ATA Chief Economist Bob Costello said. “While the year-to-date improvement is running behind last year’s robust 6.3% increase, gains this year are more broad-based.

“It isn’t just heavy freight for sectors like tank truck and flatbed from energy and housing that are improving this year.

Now, generic dry van trailer freight is doing better as well, which wasn’t the case in 2013. This is a good sign for the economy.”

The across-the-board gains shown in ATA’s latest shipment statistics include a 4.6% year-over-year volume increase for truckload freight and 8.9% in less-than-truckload shipments.

That improvement was underscored last week when FedEx Corp.’s less-than-truckload Freight unit reported 12% higher shipment levels for the quarter ended May 31.

Costello, who has said that he is optimistic about the factory sector, expects gross domestic product growth will be 3% or more during the rest of the year and an overall 4.5% annual rise in tonnage.

He noted that comparisons with 2013 will be tougher for tonnage because last year produced a 6.3% rise, a 15-year high.

The non-seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets, was 133 in May. That was 0.3% over last May and 1.8% above April.

“As we work our way through the second quarter, we are making up for lost time, and that is driving solid freight performance,” James Meil, a principal of ACT Research told Transport Topics, referencing sluggish economic conditions during the winter.

He cited positive factors such as increased manufacturing and motor vehicle production that are helping to fuel current growth. In particular, new orders as measured by the Institute of Supply Management are particularly favorable.

“Those could be the building blocks for a very solid second half,” he said.

However, Meil sounded two cautionary notes.

One of them is turmoil in the Middle East that could force up diesel and gasoline prices, possibly to levels last seen in 2008. Another is slower-than-expected housing growth, he added.

Spot market trends reported last week by load board operators DAT and Internet Truck Stop remained above year-ago levels, where they also stood in May.

The latest spot reports showed a drop-off from early June in load levels, but rates continue to increase. Even with the drop-off, loads posted were 10 times the level of trucks being made available, DAT said.

“The [ITS] market demand index remains very favorable to carriers,” said Jeremy West, economist for the load board operator.

“The retail sales increase in May was the fourth-consecutive monthly increase, a solid development for a sector that has seen subpar performance during the past few years, and a good signal for trucking activity throughout the peak summer shipping season.”

Other analysts’ commentary cited a broad set of factors affecting freight markets as the summer begins.

“Now that we are almost four months removed from the severe weather events, the percentage of volume growth that is attributable to pent-up demand has dwindled, but the overall growth has continued to be solid,” said a June 19 report from Jason Seidl, a Cowen and Co. analyst.

 “If the economy starts to accelerate as we move through the summer months, additional strain would be put on an already fragile capacity situation,” said Lawrence Gross, a senior consultant for consultant FTR.

“We believe the continued strength in California imports bodes well for freight volumes and should serve to tighten truck capacity,” driving up rates, a report from Citibank analyst Robert Salmon said.

The largest rate increase reported by DAT was within 3 cents per mile to $2.41 for refrigerated freight out of California, during produce shipping season. Van rates inched up to $2.07 per mile, DAT reported, within 3 cents of the all-time per mile pay record set in March.

Salmon also said LTL markets in the Northeast will be bolstered by the failure of Westampton, New Jersey-based New Century Transportation.

ATA’s increase in the April index was revised down to 0.9% from a preliminary gain of 1.5% over March that was reported May 20.