Freight Decline Worsens
By Jonathan S. Reiskin, Associate News Editor
This story appears in the July 9 print edition of Transport Topics.
The decline in truck tonnage accelerated from April to May, dropping 3.6% compared with last May — the largest year-over-year fall-off since January, according to the latest survey by American Trucking Associations.
ATA’s June 27 preliminary report said its seasonally adjusted index of truck tonnage was 110.6 in May, down from 112.1 in April. A year ago, it was 114.8 in May and 115.2 in April. Based on a survey of member motor carriers, the index compares business activity to a base level of 100 in the year 2000.
The continuing weakness in freight volumes is consistent with overall economic performance, which was largely flat during the first quarter and has not shown convincing signs of growth since then.
“Most carriers indicated volumes were soft and spotty in May, which was clearly reflected in our index,” said ATA Chief Economist Bob Costello.
Con-way Inc., parent of the nation’s third-largest less-than-truckload carrier, told investors June 28 that soft freight levels would cut into earnings this year.
“The less-than-truckload freight market has become increasingly competitive, which has reduced yields at Con-way Freight as pricing pressure has intensified across the board,” said Chief Executive Officer Douglas Stotlar.
The general mixture of recent economic news offered no clear picture of how the economy is moving.
On June 28, the Federal Reserve System’s Open Market Committee kept its key target for short-term interest rates at 5.25% a year, where it has been since June 2006.
Energy continued to rise, as the price of crude oil topped $71 a barrel on July 2. Meanwhile, on June 27, the Commerce Department said orders for durable goods fell by 2.8% in May, relative to April.
However, there was some good news in that the Institute for Supply Management’s manufacturing index rose to 56 in June from 55 in May. Readings of more than 50 indicate expansion.
Commerce also said that construction spending rose by 0.9% in May — the largest increase in more than a year. Meanwhile, the Transportation Department said cross-border surface trade among Canada, Mexico and the United States rose by 5.3% in April.
For many trucking companies, though, it is difficult to ignore the continuing problems in the housing industry. Costello said that, if the correction in housing is near its low point, trucking would be all right, but if deterioration accelerates, “that would be a red flag.”
Billy Hupp, chief operating officer of Estes Express Lines, stressed the importance of the housing industry.
“Any carrier tied to the housing industry is really feeling the pinch,” he said. “I’ve heard people say there’ll be a recovery in the fourth quarter, but I won’t believe it until I see it.
“The hit with housing affects furniture, boxes of nails, electrical boxes, draperies and more. . . . I think there’s definitely less freight out there than the same time last year, and I think the less-than-truckload sector is softer than truckload now,” said Hupp, whose Richmond, Va., LTL carrier is the nation’s sixth largest.
Hupp explained that LTL probably is suffering through a greater contraction because shippers are trying to economize on their transportation spending by consolidating shipping movements into less-expensive truckloads.
“The shipping public is very creative today. They’re reducing their freight budgets through better planning,” Hupp said, adding that Estes is taking the time to examine its own processes.
Lance Craig, president of regional truckload carrier Craig Transportation Co., said his business has behaved like a “see-saw.”
“Our revenue is up 10%, but it’s been like starting a car with a sputtering engine. March was good, April was rough and May was down.
“I don’t know what the next month will hold, but I do know that this year is different from last year. In 2006, revenue was more steady,” Craig said.
He attributed the growth he has had to the shorthaul nature of his business — the average length of haul is 350 miles, he said.
“We’ve had growth in sales because we can attract drivers and keep them busy,” said Craig.
On the truckload spot market, an executive for load board TransCore 3sixty said that while June was more active than May, the need for last-minute shipping is still down from a year ago.
“The average number of loads per day posted by freight brokers and shippers was up 17% from May to June,” said David Schrader, a TransCore vice president.
However, the company also tracks the ratio of loads offered relative to trucks seeking freight, where a high number indicates many shippers seeking a scarcity of trucks.
In June 2006 the loads-to-trucks ratio was about 5½:1, Schrader said, whereas last month, it was just under 3:1.
This story appears in the July 9 print edition of Transport Topics.
The decline in truck tonnage accelerated from April to May, dropping 3.6% compared with last May — the largest year-over-year fall-off since January, according to the latest survey by American Trucking Associations.
ATA’s June 27 preliminary report said its seasonally adjusted index of truck tonnage was 110.6 in May, down from 112.1 in April. A year ago, it was 114.8 in May and 115.2 in April. Based on a survey of member motor carriers, the index compares business activity to a base level of 100 in the year 2000.
The continuing weakness in freight volumes is consistent with overall economic performance, which was largely flat during the first quarter and has not shown convincing signs of growth since then.
“Most carriers indicated volumes were soft and spotty in May, which was clearly reflected in our index,” said ATA Chief Economist Bob Costello.
Con-way Inc., parent of the nation’s third-largest less-than-truckload carrier, told investors June 28 that soft freight levels would cut into earnings this year.
“The less-than-truckload freight market has become increasingly competitive, which has reduced yields at Con-way Freight as pricing pressure has intensified across the board,” said Chief Executive Officer Douglas Stotlar.
The general mixture of recent economic news offered no clear picture of how the economy is moving.
On June 28, the Federal Reserve System’s Open Market Committee kept its key target for short-term interest rates at 5.25% a year, where it has been since June 2006.
Energy continued to rise, as the price of crude oil topped $71 a barrel on July 2. Meanwhile, on June 27, the Commerce Department said orders for durable goods fell by 2.8% in May, relative to April.
However, there was some good news in that the Institute for Supply Management’s manufacturing index rose to 56 in June from 55 in May. Readings of more than 50 indicate expansion.
Commerce also said that construction spending rose by 0.9% in May — the largest increase in more than a year. Meanwhile, the Transportation Department said cross-border surface trade among Canada, Mexico and the United States rose by 5.3% in April.
For many trucking companies, though, it is difficult to ignore the continuing problems in the housing industry. Costello said that, if the correction in housing is near its low point, trucking would be all right, but if deterioration accelerates, “that would be a red flag.”
Billy Hupp, chief operating officer of Estes Express Lines, stressed the importance of the housing industry.
“Any carrier tied to the housing industry is really feeling the pinch,” he said. “I’ve heard people say there’ll be a recovery in the fourth quarter, but I won’t believe it until I see it.
“The hit with housing affects furniture, boxes of nails, electrical boxes, draperies and more. . . . I think there’s definitely less freight out there than the same time last year, and I think the less-than-truckload sector is softer than truckload now,” said Hupp, whose Richmond, Va., LTL carrier is the nation’s sixth largest.
Hupp explained that LTL probably is suffering through a greater contraction because shippers are trying to economize on their transportation spending by consolidating shipping movements into less-expensive truckloads.
“The shipping public is very creative today. They’re reducing their freight budgets through better planning,” Hupp said, adding that Estes is taking the time to examine its own processes.
Lance Craig, president of regional truckload carrier Craig Transportation Co., said his business has behaved like a “see-saw.”
“Our revenue is up 10%, but it’s been like starting a car with a sputtering engine. March was good, April was rough and May was down.
“I don’t know what the next month will hold, but I do know that this year is different from last year. In 2006, revenue was more steady,” Craig said.
He attributed the growth he has had to the shorthaul nature of his business — the average length of haul is 350 miles, he said.
“We’ve had growth in sales because we can attract drivers and keep them busy,” said Craig.
On the truckload spot market, an executive for load board TransCore 3sixty said that while June was more active than May, the need for last-minute shipping is still down from a year ago.
“The average number of loads per day posted by freight brokers and shippers was up 17% from May to June,” said David Schrader, a TransCore vice president.
However, the company also tracks the ratio of loads offered relative to trucks seeking freight, where a high number indicates many shippers seeking a scarcity of trucks.
In June 2006 the loads-to-trucks ratio was about 5½:1, Schrader said, whereas last month, it was just under 3:1.
