March Truck Tonnage Rises 1.6%

Gain Is 1st Year-Over-Year Increase Since June
By Tarun Reddy, Staff Reporter
This story appears in the May 7 print edition of Transport Topics.
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After dropping for eight straight months, freight volumes rose 1.6% in March, American Trucking Associations said in a preliminary report, but industry observers said it was too early to suggest a rebound in tonnage was imminent, because the economy remained soft.
ATA said its tonnage index rose 1.2% from February and stood at 114.6, up from 113.1 a year earlier.
The year-over-year gain for March was the largest since December 2005.
ATA Chief Economist Bob Costello said the increase was good news, because he had not expected freight tonnage to improve until later in the year. But he told Transport Topics it was the first increase since June “and could drop again later this year.”
Costello said he was cautious about the direction of tonnage because of continued weakness in the residential construction market: When the housing market is weak, it affects other markets and tends to lead to fewer loads hauled by carriers.
“I don’t think the housing market has bottomed out yet,” Costello said.
He added that some carriers told him their freight volumes were decent in March, “but April was just so-so.”
William Zollars, chairman and chief executive officer of YRC Worldwide, said April 27 the company “saw a bit of an uptick” in freight volumes in March after seeing declines in January and February.
Zollars said he now expects freight volumes to improve in the third quarter of the year, rather than the second quarter.
YRC said less-than-truckload tonnage at its longhaul unit fell 3.8% during the first quarter, compared with 2006, and that it dropped 2.6% at its regional division.
Zollars said a weak manufacturing environment has been a key reason for the lower tonnage at YRC Worldwide in most parts of the country. “About the only area performing reasonably well is the West,” Zollars said.
Roger Amhof, chief executive officer of truckload carrier Amhof Trucking, said tonnage was relatively flat in March compared with the same period in 2006. But April freight volumes proved to be much stronger for the company, which is based in Eldridge, Iowa.
“We were really swamped with orders in April,” Amhof said, without giving a specific figure for the increase.
Steve Vaughn, president of less-than-truckload carrier Daylight Transport, said tonnage in March was flat even though the number of shipments increased from a year ago. Shippers “are placing orders, but in smaller amounts,” which is affecting tonnage.
Vaughn said Daylight, Long Beach, Calif., has seen good freight demand for loads heading to the Midwest. But it is difficult to find backhauls because of weakness in the automotive sector.
Costello said a key Commerce Department index that measures inventories to sales suggests the freight environment remains uncertain. The March inventory-sales index rose 0.2%, compared with a year ago. When the index rises, it suggests companies are decreasing freight shipments.
Recent economic reports showed weakness in the overall economy. Gross domestic product, the broadest measure of economic activity, slowed to a 1.3% annual rate during the first quarter after growing at a 2.5% pace in the fourth quarter.
“While the growth rate is slower than recent quarters, it’s important to realize that a quarter is only a snapshot of the larger economic picture,” said Commerce Secretary Carlos Gutierrez.
The Federal Reserve said in its April Beige Book report on regional economic conditions that freight demand was mixed in some areas, including the Cleveland banking district. “Although overall demand for trucking and shipping service remains soft, half our contacts reported a slight uptick since mid-February.”
A majority of Cleveland district trucking companies surveyed said capital spending would be lower than a year ago, the Fed report said. “Many companies pushed up purchasing timetables for truck engines to 2006” because of tighter Environmental Protection Agency emission standards that took effect Jan. 1.
The Fed also said many carriers in its Atlanta district reported weak freight demand from March to mid-April.
“A major regional rail company noted lower automobile- and housing-related shipments,” the Fed said.
Meanwhile, the Commerce Department said May 2 durable goods orders rose 3.1% in March, the largest gain in more than a year.
“While we’re not seeing unbridled optimism from businesses,” things are looking up, Richard DeKaser, chief economist at National City Corp., told Bloomberg News.