November Tonnage Hits Another Record

This story appears in the Jan. 6 print edition of Transport Topics.

Truck tonnage reached another record in November, climbing 8.1% from a year earlier, setting the stage for continued improvement in 2014, American Trucking Associations reported.

ATA said the seasonally adjusted index reached 128.5 in November, gaining 2.7% from the previous month, as truckload van freight picked up, complementing steady increases in heavy freight for the energy, housing and automotive industries.

“Tonnage might slow down from a surprisingly strong 5.8% rate [in 2013], but still be very robust in historical terms,” ATA Chief Economist Bob Costello said.

Costello forecast growth at between 4% and 5% this year. The 2013 pace was more than double the 2.3% tonnage growth in 2012 over 2011.

For 2014, he predicted as much as 2.5% more truckload freight, a pace that tops a 0.9% rise that was achieved solely through a stronger performance in the second half.

Other industry watchers also detected an improving freight market.

“There seemed to be some pretty good numbers coming out of the manufacturing sector as we closed out the year,” James Meil, chief economist at Eaton Corp., told Transport Topics on Jan. 2.

Meil cited the Institute for Supply Management factory index report reading of 57 for December, saying it was “solid and consistent with” the 56.4 in October and 57.3 in November. An ISM number above 50 signals factory expansion.

Another positive was industrial production that rose late last year to a pace of 6% to 7% annualized improvement. In addition, the Commerce Department said on Dec. 24 that orders for goods meant to last more than three years rose 1.2% in November, excluding aircraft.

“Demand improved in November and December-to-date, with pockets of spot demand activity present, given supply constraints and seasonal retail demand,” said a report from Benjamin Hartford of Robert W. Baird, tying the improvement to the end of the October partial U.S. government shutdown.

The DAT Trendlines report for November showed an 11% rise in spot-market loads, the company said Jan. 1.

“We are seeing a continuation of what we have seen in the second half of 2013 — abnormally strong freight volumes,” said David Schrader, vice president of DAT’s parent company, TransCore, who also cited tighter capacity last month. “It is easier for carriers to find freight, enabling them to be more selective.”

“I’m growing more optimistic about 2014, but growth will remain subdued compared with previous banner years,” ATA’s Costello said.

Costello cited a rebound in consumer spending, pegged to grow at a brisk 4.6% pace in 2014, as well as continuing improvement in housing, higher factory output, the oil and gas booms and December’s federal budget deal that removes government uncertainty.

Costello’s report also forecast that truckload revenue could rise as much as 2.8% and rates could climb as much as 4%. Growth will be stronger in tank and flatbed markets than dry van freight.

On the less-than-truckload side, the forecast was for tonnage to rise between 2.5% and 3.5%, with faster improvement in LTL revenue and rates.

Eaton’s Meil was more cautious about this year.

He explained, “We have had a few years now where we would end on an up-ramp, and then run into headwinds in the early part of the calendar year. We are happy with what we see, but we don’t want to be fooled by a head fake.”

As evidence, he pointed to the end of 2013 following the same trend as 2012 and 2011.

“Before declaring this is going be a really strong year, we want to see some follow- through in the early months of 2014,” he said.

ATA’s not seasonally adjusted index, measuring freight actually hauled in November, stood at 122.4. That was 5.8% above the 2012 period but 8.8% below October.

Mixed with the optimism over improved economic and trucking market conditions was a growing sense of concern among shippers about tighter capacity this year, said reports from Hartford and BB&T Capital Markets analyst Thom Albrecht.

“Shippers are doing what they can to line up coverage in 2014,” Albrecht said. Some freight lanes already are experiencing stress on capacity, he said, particularly beverage and paper shipments.

Costello also said he was concerned about continued “choppiness” in freight markets that intermingled periods of strong and weak demand.

“Once the choppiness of loads subsides, capacity will tighten significantly,” he wrote. “Until then, be concerned about margin pressures as fleets have to increase driver pay and replenish older trucks with newer, more expensive ones.”

ATA also revised its October numbers to show a 1.9% sequential decline from September compared with the earlier 2.8% drop that was reported Nov. 19.