Slow Freight Growth Continues as April Tonnage Rises 3.5%

Truck tonnage rose 3.5% in April over year-ago levels, American Trucking Associations reported, continuing a pattern of modest increases that mirror the overall U.S. economy.

ATA’s preliminary seasonally adjusted index rose to 118.7, the 29th straight month of growth, although slightly behind the 3.9% average pace during the year’s first three months.

On a sequential basis, the April index fell 1.1% from March. However, the sequential index has risen seven of the past nine months.

While calling the April report “a little disappointing,” ATA Chief Economist Bob Costello said the report was in line with an up-and-down series of economic reports that add up to a moderating pace of growth.

Among the indicators moving in a favorable direction were new and existing home sales, both of which showed year-over-year and sequential growth in reports issued last week. On the other hand, durable goods production levels have been moving between negative and positive in recent months, and the April index of leading indicators dropped last month for the first time since last fall.

Costello also said he expects the U.S. economy to “grow slightly slower in the second quarter than in the first quarter.”

First-quarter gross domestic product growth was 2.2%, according to the Commerce Department. While Costello sees a slowdown, the average second-quarter growth forecast, based on a survey of 69 economists by Bloomberg News, is 2.3%.

“I continue to expect tonnage to moderate from the [5.8%] pace over the last two years,” Costello said. “Annualized growth in the 3%-to-3.9% range seems more likely.”

ATA’s non-seasonally adjusted index, measuring freight actually carried last month, was 116.9, a 2.8% year-over-year improvement, but 5.5% below March 2012.

Fleet comments at recent investor conferences underlined the general pattern of modest growth.

Douglas Stotlar, CEO of Con-way Inc., said less-than-truckload freight levels showed “a very nice uptick” of 2.4% in April, with continued growth at a slower pace so far in May.

“We saw a decent April and May — it’s not great, but it’s pretty good,” said Swift Transportation Co. CEO Jerry Moyes.

“It’s a good, but not great, [freight] environment,” said John Steele, chief financial officer of Werner Enterprises Inc. He said on May 23 that freight demand is following a normal seasonal improvement pattern this year, with volumes rising from March to April and from April to May.

However, some industry observers remain cautious.

“The recent moderation in truck tonnage is a bit concerning,” said a report from Jefferies & Co. analyst Peter Nesvold.

He said other transport indicators — such as railcars in use and the Cass freight index report, which covers all modes of transportation — have signaled weakening growth.

In addition, “the unseasonably warm winter makes it unusually difficult to draw firm conclusions on some U.S. [economic] data,” he said.

A 5.5% year-over-year tonnage increase in February illustrated that weather effect. The increase that month far outpaced the others this year.

Nesvold’s report also raised the prospect that the streak of consecutive tonnage growth, which began in December 2010, may be in jeopardy.

“Volumes have been soft so far in May and trail year-over-year levels,” he wrote, also observing that the April tonnage report showed a moderating trend in the U.S. economy. “Weekly diesel consumption has struggled to find a definitive trend, vacillating between year-over-year growth and declines.”

While Nesvold expressed some reservations, Deutsche Bank analyst Justin Yagerman had a more positive view.

“We expect freight demand to strengthen seasonally during May/June,” Yagerman said in a May 23 report that also cited higher West Coast imports.

Data from load board operator TransCore also illustrate the uneven pace of recent freight trends.

“We see a pretty mixed freight picture,” TransCore analyst Mark Montague told Transport Topics, with demand patterns in April and early May that are closely tied to geography.

“The Southeast region demand is very robust, with flatbed and reefer capacity very tight,” he told TT last week. On the other hand, Montague noted that other markets seem to be weaker than usual in the spring, citing California and the Midwest.

Montague said the April tonnage comparisons also could be affected by weather, because there was a surge of business last spring to move construction and other materials after widespread tornadoes and flooding.

TransCore previously reported that its April load board activity set a monthly record.

Montague said that record is an indicator of the long-term trend that shows increasing freight activity in the spot market, as TransCore’s load board activity last year rose six times faster than ATA’s tonnage index.