Tonnage Growth Slows
This story appears in the May 25 print edition of Transport Topics.
The continued growth of truck tonnage stalled in April to the slowest pace in more than two years, rising only 1% over the same month a year earlier, American Trucking Associations reported.
The seasonally adjusted for-hire index was 128.6, the index’s lowest level since April 2014, ATA said May 19. It was the smallest year-over-year gain since February 2013, when it contracted 4.3%.
“Unless tonnage snaps back in May and June, [gross domestic product] growth will likely be suppressed in the second quarter,” ATA Chief Economist Bob Costello said.
Costello noted that tonnage is off 5.3% from its record high in January, when it was 135.8, though it is up 3.8% year-to-date through April over last year.
The April reading was down 3% from March, and the year-over-year gain was revised down to 4.2% from an originally reported 5% increase.
March’s originally reported 133.5 index reading also was revised down to 132.6, while its increase from February was revised to 0.4% from an originally reported 1.1% gain.
The not-seasonally adjusted index, which represents the tonnage hauled by fleets before seasonal adjustments, was 130.6 in April, which was 5.9% below March.
The year-over-year slowdown reflected several other economic indicators showing sluggishness.
Factory production was unchanged in April after a 0.3% gain in March, the Federal Reserve reported May 15. Excluding autos and parts, production declined 0.1%. Total industrial production fell 0.3%, the fifth straight monthly downturn, on lower mining and utility output.
Retail sales were flat, and while the University of Michigan’s monthly consumer sentiment rose for April, its preliminary index for May, released May 15, fell to the lowest level since October.
Not all economic indicators were slack, however, Housing starts jumped 20.2% in April, the biggest surge in more than seven years. Building permits, an indicator of future construction, also rose to the highest level in seven years.
Costello said he “wasn’t expecting a strong month, but this was weaker than I thought.” He noted factory output and retail sales weighed on tonnage. “I believe an inventory correction is happening — the inventory-to-sales ratio is high — which also suppressed tonnage.”
Arun Maha, chief economist for Eaton Corp., said the truck tonnage figure was “not surprising,” given further evidence of economic softness continuing into spring.
“Perhaps we will see some improvement in May and June, but overall, the outlook remains weak,” Maha told Transport Topics.
“At this point, however, I am not worried about Class 8 truck build for the year,” he said. “The order backlog remains healthy, and build slots remain scarce.”
Noël Perry, trucking economist and partner at FTR, greeted the tonnage level with caution, noting the economy’s steady but relatively slow growth.
“There are enough negative signals going around to be wary,” he said. “We need another quarter’s worth of data to draw any conclusions about any radical changes in the economy.”
“Many of the manufacturing indicators have been disappointing, and there’s a good chance that the second half of the recovery could be disappointing for trucking,” he told TT.
Freight grew by an average between 4% and 5% in 2013 and 2014, Perry said, adding that last month, FTR lowered its growth projection for 2015-2016 to 3.3%, from 4%.
“We’re holding around 3% right now,” he said. “They’re still pretty good numbers, but they’re lower than where we’ve been,” he said.
“What’s highly likely is we’re not going to get a big burst of freight like we thought we might for the next few years, and we suspect it’s going to be pretty weak,” Perry said.
“But that’s different from saying recession. Let’s call it a yellow caution flag rather than a red flag,” he said, in a reference to the Memorial Day weekend’s Indianapolis 500 race.
