April Tonnage Increases 4.3% Despite Weather Disruptions

This story appears in the May 27 print edition of Transport Topics.

Truck tonnage rose 4.3% in April from a year earlier, exceeding analysts’ expectations, despite violent weather that disrupted parts of the country, American Trucking Associations reported last week.

The preliminary seasonally adjusted index was 123.2, ATA said May 21. The April increase was the largest since a 4.7% jump in January and followed a 3.9% rise for the first quarter.

On a sequential basis, the index fell 0.2% in April from March, after a 0.9% month-to-month increase the previous month.

“After rising significantly late last year and in January of this year, truck tonnage has been bouncing around a narrow, but elevated, band over the last three months,” ATA Chief Economist Bob Costello said. “It is also worth noting that the year-over-year comparisons are much better than expected just a few months ago.”

And, Costello added, “I’m hearing good comments about freight so far in May.”

Anecdotal carrier comments reinforced Costello’s observations.

Knight Transportation President David Jackson said at a May 15 investor conference that May freight was showing surprising strength, and that volumes so far indicated that will continue until at least the end of June.

Old Dominion Freight Line Inc. on May 13 said it continues to expect 4.5% to 5% higher second-quarter daily tonnage than a year earlier.

“We are seeing momentum,” Swift Transportation Co. President Richard Stocking said May 10. “May started off a bit better than April. It’s a little bit stronger. April was OK. We had some funky weather in April in parts of the West.”

Bank of America Merrill Lynch analyst Ken Hoexter said in an investor note that “the elongated winter appeared to have defrayed some spring shipments, aiding the May rebound, as well as a building beverage season.”

The recent strength prompted Costello to raise his 2013 tonnage growth projection to between 2.8% and 3% from 2.5%. He continues to expect the growth pace to decelerate later this year.

William Strauss, senior economist at the Federal Reserve Bank of Chicago, and James Meil, chief economist at Eaton Corp., told Transport Topics on May 21 that tonnage and the United States could be following a pattern that occurred last year.

“So far, truck tonnage is reflective of what we are seeing in the economy,” said Strauss, outlining a solid beginning followed by what he termed “a bit of a soft patch” last year.

In 2013, first-quarter gross domestic product rose 2.5%. In the 2012 first quarter, GDP rose 2% before slowing to an average of 1.6% growth during the next three quarters.

“I am wondering if the pattern will repeat itself,” Meil said, citing a view shared by Strauss.

ATA also reported that on a year-over-year basis, the non-seasonally adjusted tonnage index stood at 125.9, which was 7.7% above the same month of last year and 0.5% above March 2013.

Deutsche Bank analyst Justin Yagerman said the 7.7% pace wasn’t a sign of broad freight market strength.

He noted a 3.5% April decline in the Cass freight index, which measures trucks as well as rails, barges and airfreight based on freight bill payments.

Other industry reports also weren’t positive.

Load board operator DAT said North American freight volume fell 16% from its record level in April 2012, including declines of 20% in vans, 10% in refrigerated and 15% in flatbed freight.

“Unusually inclement weather, including floods in the upper Midwest, may have been a factor,” DAT said in a May 13 statement.

“The slight drop in tonnage during April fit with trends from other industries that drive a significant amount of truck freight, such as manufacturing and housing,” ATA’s Costello said.

Costello cited April statistics such as a 0.4% drop in factory orders and a 16.5% decline in housing starts, also on a sequential basis.

However, he noted at a recent industry conference that strong trends exist in sectors such as domestic energy production.

Despite the recent uneven economic numbers, Strauss said “my contacts remain optimistic that this is going to be a decent year overall. I haven’t seen too many people waving the white flag.”

Meil said, “It continues to be a slow growth economy. Some parts are doing well. Other parts of the economy are flattening out.”

On the sluggish side, he cited defense-related activity as a result of federal budget cutbacks, and exports such as machinery to Europe and Asia as economies there slow.

Meil believes the economy and tonnage will grow between 2% and 2.5% this year, which he called an “OK number.” He noted that projection was far slower than the 3.3% annual average for more than two decades before the recession in 2008.

Staff Reporter Eric Miller contributed to this report.