September Truck Tonnage Rises 2.4%

This story appears in the Oct. 29 print edition of Transport Topics.

Truck tonnage in September continued to rise above year-ago levels, but at the slowest pace since December 2009, posting a 2.4% increase that illustrates continued economic weakness, American Trucking Associations reported.

The seasonally adjusted index stood at 118.7 in September. Although the growth pace decelerated for a third consecutive month, truck tonnage has now recorded a streak of 34 consecutive year-over-year increases. So far in 2012, truck tonnage is 3.6% above the same period of 2011.

On a sequential basis, truck tonnage continued to seesaw last month, rising 0.4% in September over August, after a 0.9% drop the month before. Third-quarter tonnage rose just 0.4% from the second quarter, and September’s reading was equal to January’s level.

“Expect year-over-year comparisons to continue shrinking through the rest of the year, as tonnage grew nicely during the last three months of 2011,” said ATA Chief Economist Bob Costello.

He said tonnage will likely rise less than 3.5% for the year but that he was “encouraged that the seasonally adjusted index edged higher from August.”

Offering an analysis that also was cited by other carriers in recent earnings reports, Steve Russell, CEO of Celadon Group Inc., said, “The industry is fraught with challenges in the weak economy in which we operate.”

“Uncertainty about the election certainly has been a factor,” he said on an Oct. 24 investor call. “Hopefully, after the election things will pop back up.”

Richard Stocking, president of Swift Transportation Co., offered hope that the fourth-quarter freight pace would pick up sooner in light of the rising retail sales and slim inventory. The U.S. government on Oct. 15 reported a 5.4% rise in retail sales for September.

“We believe we are seeing the beginnings of a peak season building in October and although it is only a couple of weeks, the freight trend has been up both sequentially and year-over-year,” Stocking said.

He explained that customers “are leading us to believe that inventory levels are relatively low and that as customer demand increases over the next four to six weeks going into the holiday season, they will have demand.”

Costello said that Swift’s assessment was good news, but noted the inventory-to-sales ratio, which measures how many months it would take for a firm to reduce its current inventory, remains high, though it has been falling.

Swift’s commentary was a change from August and September, which were weaker than usual.

“The freight environment this year, especially the third quarter, has not been nearly as robust as we had hoped,” Swift said in an earnings release.

Some analyst reports, including one by Jefferies & Co.’s Peter Nesvold, were less optimistic about a retail-driven peak season volume pickup.

“Loads, which improved modestly in the back half of September with a better-than-seasonal bounce, are off to a slow start in October and trail last year’s levels,” he wrote on Oct. 24. To buttress his point, he cited a drop in recent diesel consumption measured by the firm.

ATA’s not seasonally adjusted index, measuring actual tonnage hauled during the month, gave little encouragement by finishing at 115.3. That was 9% lower than the month before, and 2.2% above September 2011.

One positive sign was the Commerce Department report that new home sales rose 27% in September from a year earlier to the highest level since April 2010. Another report showed housing starts rose 15% in September, reaching a four-year high.

Costello reiterated that stronger housing activity is helping tonnage because of heavy flatbed freight such as shingles and lumber.

But he also cited a flattening in manufacturing output as a major factor in slowing growth, and the anemic 1.3% rise in gross domestic product in the first half of 2012.

In other reports, durable goods orders for September rose 2%, excluding airline orders, and capital goods orders were little changed.