March Truck Tonnage Rises 6.3%

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

U.S. truck tonnage rose 6.3% in March, the 16th consecutive year-over-year increase, as U.S. economic growth continued even in the face of sharply higher fuel costs, American Trucking Associations reported.

The seasonally adjusted index reached 115.4, ATA said on April 26. Year-over-year growth accelerated from the 4.4% gain in February.

Meanwhile, on a month-to-month basis, the index rose 1.7% from February to March.

The trucking group’s tonnage report was released during a week when diesel prices remained above $4 a gallon nationwide. There is growing concern among analysts that rising fuel prices could sap the recovery from the recession.

“Despite my concern that higher energy costs are going to begin cutting into consumer spending, tonnage levels were pretty good in March and the first quarter of the year,” ATA Chief Economist Bob Costello said.

“While I still think the industry will continue to grow and recover from the weak freight environment we’ve seen in recent years, the rapid spike in fuel prices will slow that growth,” Costello said.

However, in an April 27 press conference, Federal Reserve Chairman Benjamin Bernanke indicated that higher fuel and commodity prices would be only a temporary hindrance to economic growth.

The Commerce Department last week estimated that gross domestic product grew at a 1.8% annual rate in its April 28 report on the first quarter, slower than the fourth quarter’s 3.1% rate.

But there were additional signs of economic optimism last week. The Dow Jones industrial average and stock market indexes rose to nearly three-year highs, and orders for durable goods, products lasting more than three years, rose 2.5%.

Tonnage rose 6.1% in the first quarter compared with the same period last year and was 3.8% higher than the fourth quarter of 2010.

Crude oil prices have climbed more than $22 a barrel this year, prompting concern that rising fuel costs will put a serious crimp in economic growth. Costello estimated that each $10 rise in crude reduces economic growth by 0.25%.

The unadjusted tonnage index, which measures freight actually hauled without accounting for any seasonal trends, reached 123.3 in March, up 20.7% from February.

ATA’s generally positive tone was reflected in comments from fleets of all sizes.

“We were encouraged by the strengthening volume in March, which has continued in April,” said Richard Stocking, president of Swift Transportation Co., Phoenix. Swift is the nation’s third-largest truckload carrier, with 16,100 tractors.

Speaking on an April 26 conference call, Stocking noted a 5.9% volume increase at Swift, despite relatively weak business levels in the western United States, during January and February.

“Everything we have been looking at is positive,” Gary Salisbury, CEO of flatbed carrier Fikes Truck Line, based in Hope, Ark., told Transport Topics. “Our business has been picking up dramatically.”

Salisbury said that load count has gained 5% for the year and revenue is up even more, around 10%, leading to improved utilization for Fikes, which runs more than 300 tractors in an all owner-operator business.

Nearly two months of severe storms in the Midwest and South that have caused widespread damage have helped flatbed fleets by increasing demand for building products, Salisbury said.

Demand is likely to remain strong, he said, because of a marked increase in bids being sought by construction firms for building projects such as parking garages.

“People are starting to spend a little more money,” said Salisbury, who also is chairman of the Truckload Carriers Association.

Martin Frisard, president of Frisard’s Trucking Co., Gramercy, La., used the same words as Salisbury when he described market conditions for his general commodities carrier.

“We haven’t been this busy since 2008, and 2008 was a great year — the first part was phenomenal,” said Frisard, whose company has a fleet of more than 50 tractors driven by company employees and owner-operators.

Several reports from freight market analysts also continued to project a positive picture.

BB&T Capital Markets analyst Thom Albrecht said in an April 27 report that capital spending increases by U.S. businesses are rising three times faster than last year, helping to buoy demand, especially for less-than-truckload fleets that rely on the industrial sector of the economy.

A report by Chris Ceraso, an analyst at Credit Suisse, forecast continued tonnage growth in the 4%-to-8% range for the rest of 2011.

Jefferies & Co. analyst Peter Nesvold also projected continued growth, but at a more moderate 3%-to-5% pace.

In addition, Deutsche Bank analyst Justin Yagerman said he would “expect trucking demand to strengthen in the first half of 2011 as imports are expected to rise sequentially during this time.”

Despite the supply chain disruptions from the Japanese earthquake and tsunami, imports are expected to rise about 6% during the quarter, Yagerman’s report said, citing the Port Tracker report published by the National Retail Federation and Hackett Associates.