June Truck Tonnage Rises

This story appears in the Aug. 2 print edition of Transport Topics.

Tonnage hauled by U.S. trucking companies in June rose by 7.6% from year-ago levels, even as indications of a slowdown in economic growth appeared, according to American Trucking Associations.

While freight levels exceeded year-ago levels for the seventh consecutive month, June was the second straight month that the total dipped from the previous month, ATA reported on July 27.

But even as the economy appears to be cooling off, enough capacity has been taken out of the freight system that demand for transportation is essentially in line with supply, ATA said.

“I believe that truckload supply and demand are near equilibrium,” said Bob Costello, the federation’s chief economist. Costello also noted that “due to supply tightness in the market, any tonnage growth feels significantly better for fleets than one might expect.”

ATA’s seasonally adjusted truck tonnage index for June rose to 108.5, a 7.6% increase compared with June 2009. So far this year, tonnage is up 6.6% from the same period in 2009, ATA said.

However, for the first time in more than a year, tonnage levels have decreased for two consecutive months. June was 1.4% lower than May, and May tonnage was 0.1% lower than April.

The index’s benchmark level of 100 represents tonnage hauled by ATA members in 2000.

One truckload carrier on the West Coast affirmed that business has been good but said reduced capacity has done more for trucking than increased tonnage.

Business in 2010 is “much better than it’s been,” said Larry Gordon, president and chief executive officer of Gordon Trucking Inc., Pacific, Wash., though the improvement is mostly “due to the lack of capacity [and] not the amount of freight that’s moving.”

Despite the improvement, Gordon noted that business has slowed down somewhat at the start of the second half.

“We’ve had a very good year, but we’ve seen it start to taper off in recent weeks,” Gordon told Transport Topics on July 28.

With earnings season well under way, most publicly traded carriers have weighed in on tonnage and capacity in their latest quarterly reports.

Like closely held Gordon, one of the largest publicly listed truckers, Werner Enterprises of Omaha, Neb., cited the supply/demand equilibrium as the primary driver of the slowly improving U.S. freight economy.

“We continue to believe that more of the improvement in the freight market over the last six months can be attributed to a decreasing supply of truck capacity rather than rising demand,” Werner said in its report.

The head of Knight Transportation, Phoenix, observed not only a better balance of truck supply with freight but, in some lanes, evidence of a capacity crunch.

“Many of the truckload markets we serve experienced capacity constraints,” Kevin Knight, chief executive officer, said in the company’s quarterly report.

Meanwhile, less-than-truckload carrier Old Dominion Freight Line Inc. said July 28 that it logged its first double-digit tonnage increase in two years.

Second-quarter tonnage at Old Dominion, Thomasville, N.C., rose 13.4%, as shipments increased in both volume and weight from 2009, the company said.

Old Dominion expects to increase its market share in the second half, but the carrier’s “outlook remains somewhat cautious for the second half of 2010,” said David Congdon, president and chief executive officer.

Competing LTL Arkansas Best Corp. also posted better tonnage numbers in the second quarter. ABF’s tonnage rose 11.9% year-over-year and 14% from the first quarter, according to the company’s latest earnings report.

While ABF did not turn a profit, President and CEO Judy McReynolds said that “this quarter’s improved operating ratio illustrates the operating leverage that is achieved from greater freight levels moving through the ABF network.”

YRC Worldwide, the largest LTL in the country, had yet to report on its second-quarter operations at press time.

Meanwhile, forward-looking economic reports released last week foreshadowed a throttling down of the industrial and consumer sectors of the economy.

Durable goods orders declined 1% in June, the Commerce Department said July 28. It was the second consecutive monthly decline in orders.

Consumer confidence in July hit a five-month low of 50.4, the New York-based Conference Board said last week. Consumer spending accounts for about 70% of the economy, according to the federal government.

Meanwhile, the Federal Reserve’s beige book, released July 28, revealed a mixed bag of transportation news. A lone report of volume gains in the Cleveland Fed district was overshadowed by signs that carrier costs in other districts may be rising without compensatory rate increases for truckers.

The Fed’s report covers the period of May 28 through July 19.