August 6, 2007 8:00 AM, EDT

June Tonnage Falls 3.4%

Freight Drop Is 11th in 12 Months, ATA Says

By Jonathan S. Reiskin, Associate News Editor

This story appears in the August 6 print edition of Transport Topics

Freight volumes fell in June from year-ago levels for the 11th time in 12 months, American Trucking Associations reported last week, even though second-quarter U.S. economic activity rebounded nicely over the disappointing first quarter.
ATA’s July 27 preliminary report said the seasonally adjusted truck tonnage index dropped to 110.5, or 3.4% below the June 2006 level, the third straight monthly dip on a year-over-year basis. ATA’s chief economist, Bob Costello, said that for the first five months of the year, cumulatively, volumes are running 2.4% below a year ago.
The freight news stood in sharp contrast to the Commerce Department’s announcement that gross domestic product grew by 3.4% a year during the second quarter — the highest rate since its 4.8% pace during the first three months of 2006. Commerce said the economy grew by a scant 0.6% a year during this year’s first quarter.
Costello explained the gap by drawing a distinction between the general economy, which includes a lot of private and government service activity, and “the goods economy,” which is more pertinent for freight carriers.
“During the first half of 2007, total GDP grew by 1.7%, but the goods economy grew by just 0.5%,”he said. Housing and manufacturing, two sectors that are among trucking’s best customers, are generating most of the shortfall, Costello said.
“For the first half of the year, the Federal Reserve said manufacturing, as measured in dollars, grew by 2% over last year, but when you change that to a weight-based measurement of manufactured goods, it’s actually down by 1.8%,” he said.
The seasonally adjusted ATA tonnage index is constructed from a survey of the group’s members and compares business activity with a base period of the year 2000, when the index stood at 100 points. It hit a relative high point of 114.6 in March, but has fallen to 110.5 since then.
June’s reading was one-tenth of a point below May, when it came in at 110.6. However, May’s total was 3.6% less than May 2006.
As for the much-discussed problems with housing, Costello said those have hit the flatbed segment of trucking the hardest.
Bad news from the housing industry continued from July 25 to Aug. 1, with reports that construction spending dipped by 0.3% in June, new-home sales dropped by 6.6% the same month and sales of existing homes fell by 3.8%, according to the Commerce Department and the National Association of Realtors.
The news on manufacturing was uneven. Commerce said orders for durable goods rose by 0.5% in June, and the Transportation Department said cross-border surface trade in North America grew by 5.2% in May.
Also last week, the Institute for Supply Management said its factory activity index dipped to 53.9 in July, from 56 in June. Readings of more than 50 indicate activity is expanding.
At Crete Carrier Corp., No. 23 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, Chief Executive Officer Tonn Ostergard said he has seen competition heighten to haul a lower output of freight.
“Because of the slowdowns in the construction and automotive industries, there has been a reallocation of capacity,” Ostergard said in Lincoln, Neb., where Crete has its headquarters.
“We haul lots of consumer goods,” he said, “so we haven’t been hurt directly, but the [trucking] capacity that used to haul for those industries has gone hunting for other business.”
Terri Ferraro, director of supply chain and transportation for Famous Footwear, said she was hearing from more truckload carriers these days looking for additional business.
“This is supposedly peak season, but we’re not seeing anything peaking,” she said from Sun Prairie, Wis.
“I’m seeing more carriers reaching out now than at any time during the last three years. I conclude there’s some unused capacity, because we’re getting a lot of cold calls,” she said.
Ferraro said the truckload volumes her company is offering to carriers are “fairly flat from a year ago,” and Famous is generally sticking with its historical transportation partners.
Ostergard agreed with Ferraro on the absence or diminishment of traditional peaks in shipping patterns.
“Shippers continue to do a better job of managing inventory. The spikes or seasonality are not the same,” said Ostergard.
Historically, he said, trucking is very busy during the second half of a year, first with back-to-school items and then with Christmas and other holiday-related freight.
“Wal-Mart, especially, has been a leader in smoothing this out, but we haven’t seen those peaks and end-of-the-quarter surges that were typical,” Ostergard said.