Tonnage Sets New Record

This story appears in the Sept. 30 print edition of Transport Topics.

American Trucking Associations tonnage index reached another record in August, rising 6.9% from a year earlier as prospects brighten for continued improvement in some freight markets.

The advanced seasonally adjusted index reached 126.9, topping the level of 125.9 set in June, ATA reported Sept. 24.

The year-over-year gain, the largest monthly rise since December 2011, pushed tonnage up 5% for the first eight months of the year.

On a sequential basis, tonnage increased 1.4% in August, the third rise in four months. The index declined 0.6% in July from June. ATA’s not seasonally adjusted index, measuring actual freight hauled, also improved, reaching 131.3 in August, a 3.5% year-to-year improvement and 1.5% above July.

“The strength in tonnage continued again in August,” ATA Chief Economist Bob Costello said in a statement. “The improvement corresponds with a solid gain in manufacturing output during August reported by the Federal Reserve.”

The Fed’s report showed a 0.7% sequential increase and a 2.8% year-over-year improvement, which both were the greatest improvement this year.

Costello attributed the tonnage improvement to ongoing strength in several sectors that generate heavy freight — autos, energy production and housing.

Speaking at a transportation conference last week, William Strauss of the Federal Reserve Bank of Chicago said a gradual recovery in the housing market is providing some economic optimism, reflecting pent-up demand that won’t be released until the job market turns around.

“The path of the current recovery is restrained compared with past deep-recession recovery cycles,” Strauss said. “We’re not getting a strong bounce. This recession has been associated with a financial crisis, which tends to make the recovery more muted.”

The unemployment rate dipped to 7.3% in August compared with 7.4% in July, the Department of Labor reported. Strauss said he sees the year ending at 7.2% and slowly improving next year to a range of 6.8% to 6.4%.

In the auto sector, the annualized pace for cars and light trucks reached 16 million last month, the strongest level since November 2007.

“As a flatbed metals hauler for the automotive industry, volumes are strong and are suggested to be so for the next year or two,” Jim Burg, CEO of James Burg Trucking, based in Warren, Mich., told Transport Topics.

Another encouraging sign for the industry is an increase in shipments from Los Angeles to inland distribution centers in the Chicago, Memphis, Tenn., and Columbus, Ohio, areas, said David Schrader, a vice president at TransCore, operator of the DAT load board.

He said that could be a sign of strength for holiday retail sales.

Truck freight is improving as inbound volume through Los Angeles and Long Beach, Calif., the two largest U.S. ports, rose 7.5% in August to the highest level this year.

“It looks like we will have a second peak of reefer freight,” TransCore analyst Mark Montague said, referring to the unusual pattern of continued strength during July, August and September. Typically, produce in particular and freight volumes peak in June and fall off after that, he said.

Overall, DAT freight volume rose 13% higher in August over 2012 levels.

Montague tied the peak to strong apple crops in states such as Michigan and Wisconsin, where last year growers’ hopes were crushed by a Midwest drought.

Another positive trend is growing lumber shipments from the Pacific Northwest for rising construction activity throughout the United States, Montague said.

That was reflected in housing starts that rose for the second straight month in August, hitting a three-month high.

One of the companies with an upbeat housing outlook is United Technologies Corp., a technology and industrial equipment supplier.

“We have seen very solid order growth in the first half of the year, which gives us high confidence for the back half of the year,” Chief Financial Officer Gregory Hayes said at a September investor conference.

“I think people generally feel good about the commercial construction opportunities here in the U.S.”

Some fleets are seeing an improved market, but at a more modest pace.

“There have been flashes of good freight [this year],” said Bob Peterson, CEO of Melton Truck Lines in Tulsa, Okla. “September is a little stronger than it has been, but it’s not booming.”

Peterson told TT that while the company has hauled more pipe and other products for oil-field production and exploration, business has been weaker for steel and some aluminum manufacturers.

“Our business levels haven’t jumped, but they have been stronger,” Peterson said.

Another favorable economic report surfaced Sept. 25, as the Commerce Department said orders for durable goods, excluding aircraft and military equipment, rose 1.5% in August from the previous month. It reversed the 3.3% drop in July.

The durable goods orders pace, which signals future business investment activity, was the biggest since May.

ATA’s Costello cautioned that tonnage is rising faster than overall freight volumes.

“Tonnage’s strength in recent months, and really through 2013, is probably overstating the robustness of the economy and trucking generally,” he said. “Truckload industry loads have accelerated the last few months but are flat for the year, while less-than-truckload shipments are up less than 1.5% in 2013.”

News Editor Lorrie Grant contributed to this story from Indianapolis.