February Truck Tonnage Rises 5.5% on U.S. Manufacturing Strength

Truck tonnage posted a solid 5.5% gain in February from a year earlier, American Trucking Associations reported, continuing a pattern of steady growth that began in late 2009 and setting the stage for further expansion.

The advance seasonally adjusted index stood at 119.3, after the 27th consecutive year-over-year improvement, the March 27 report said. It also was the sixth gain in the past seven months on a sequential basis.

“Fleets told us that February was decent, and that played out in the numbers,” Bob Costello, ATA’s chief economist, said, crediting the gains primarily to strong U.S. manufacturing performance. “I’m still expecting continued truck tonnage growth going forward.” 

“Manufacturing has really been driving a lot of this tonnage in-crease,” he said, noting that tonnage now is 18% above the summer of 2009 trough.

Economic reports last week backed up his statement, including a 3% increase in fourth-quarter gross domestic product and a 2.2% rise in durable goods orders in February, the Commerce Department announced.

Stronger orders for cars and computers led the increase in durable goods, which are meant to last at least three years.

“Business spending will remain a key driver of the U.S. economy — not to the same extent as last year but still a positive force,” Sal Guatieri, a senior economist at BMO Capital Markets, told Bloomberg News. “The auto industry looks to be coming back because of stronger demand.”

Commerce also said orders — excluding aircraft and defense items — were 1.7% higher, led by an advance of 11.2% in communications equipment that was the highest since June and 5.7% for machinery. Unfilled orders — excluding planes and military business — also rose, signaling further growth, the agency said.

Auto sales in February reached a 15 million annual rate, the best in four years, said Ward’s Automotive Group. That pace is 60% above sales during the depths of the recession in February 2009.

February’s tonnage index growth topped January’s revised 3.1% rate. ATA’s not-adjusted-seasonally index, a measure of freight actually moved during the month, rose to 112.9, or 1.3% above January’s level.

The future tonnage growth wasn’t forecast by Costello. However, two reports from analysts sketched the outlook.

Credit Suisse analyst Chris Ceraso forecast year-over-year trucking freight growth around 2% for the rest of 2012. He also said that February’s 0.5% tonnage increase over January was better than the typical decline of 0.4% that has been the average over the past 10 years.

“We expect freight demand to strengthen seasonally during March/April given solid retail sales (up 6.3% year-over-year in February) coupled with low inventories, growing consumer confidence, and stable income levels,” Deutsche Bank analyst Justin Yagerman said.

Wes Frye, chief financial officer of Old Dominion Freight Line, said that during March the less-than-truckload carrier’s tonnage growth had “well exceeded” ATA’s index. Over January and February, its growth averaged 12%, while ATA’s average was 4.3%.

Costello mentioned two other reasons for optimism about tonnage growth.

“We have also seen some signs of life in the housing sector,” Costello said. “That really helps flatbed carriers.”

Sales of pre-owned homes rose more than 10% on a year-over-year basis, the National Association of Realtors said in March.

“Fracking for natural gas also has been very strong,” Costello said, referring to the hydraulic fracturing process that injects water to extract natural gas. “That is pushing up the index as well.”

Steve Attwood, president of tank carrier Quality Distribution Services, said on a March 12 conference call that the carrier is expanding in areas where it’s hauling water to support drilling efforts.

He also noted that the steady drop in natural-gas prices to a 10-year low “obviously spurs growth in the U.S. chemical industry, which helps us.”

Quality benefits by hauling finished chemical products for domestic use and exports, he said.

On a larger scale, the economic picture is mixed, Costello said.

One damper is the steady rise in fuel prices. As of March 28, gasoline prices have climbed about 20% this year and have risen in 13 of the past 14 weeks, according to Energy Department statistics.

“I am a little concerned about fuel prices,” Costello said. “As consumers spend more on fuel, that is a tax on them, and they have less to spend elsewhere.”

On the other hand, Costello noted, “Luckily, some of this [fuel cost increase] is being balanced by some pretty robust gains over the last couple of months in jobs.”

The United States has added a total of more than 500,000 jobs in January and February, Labor Department reports show.

The next jobs report will be issued April 6.