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June 21, 2022 12:00 PM, EDT

Tonnage Jumps 3.7% in May

Trucks on highwayElijah Nouvelage/Bloomberg News

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Truck tonnage jumped 3.7% in May compared with year-ago levels, marking the ninth consecutive year-over-year gain and the largest since April 2021, American Trucking Associations announced.

The ATA For-Hire Truck Tonnage Index equaled 117.1 last month, compared with 113.3 a year ago. The May result also represented a 1.4% gain over 116.5 in April. For purposes of the index 2015=100.

“The transition in the freight market continued in May, with the index hitting the second-highest level since the pandemic started,” ATA Chief Economist Bob Costello said. “The traditional spot market has slowed as freight softens, but these contract carriers are backfilling any losses in freight with loads from shippers that are reducing spot market exposure. Essentially the market is transitioning back to pre-pandemic shares of contract versus spot market.”

The ATA index is dominated by contract freight, he noted.

Across the first five months of 2022, tonnage is up 2.7% compared with year-ago levels even as the U.S. economy battles inflationary headwinds. Costello noted there were some warning signs for trucking in the May results.

“Overall, economic indicators that are important to trucking slowed in May, including retail sales, housing starts and manufacturing output,” he said.

According to ATA, trucking represents 72.5% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.23 billion tons of freight in 2020, and motor carriers collected $732.3 billion, or 80.4% of total revenue earned by all transport modes, ATA said.

Rajeev Dhawan

Dhawan

Economist Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University in Atlanta, told Transport Topics the overall economy remains strong, but he believes avoiding a recession in 2023 will require economic skill and a bit of luck.

“The issue is what is going to happen in three to six months,” Dhawan said. “As times goes by and you get to the end of this year and into next year, we become more vulnerable to a recession. Once you’re into a six- to nine-month cycle, after the Federal Reserve raises interest rates, that’s when you have to keep your fingers crossed that no curveball hits the economy.”

Meanwhile, after two years of rapid growth, the May Logistics Managers’ Index showed a year-over-year decline to 67.1 compared with 71.3 in the same month a year ago. When measured against April, the LMI dipped from 69.7. Still, it remains in strong territory and sits above its all-time average of 65.3. It reached an all-time high of 76.2 in March.

“Despite this slowdown, it should be noted that we are still observing a healthy rate of growth in transportation, but one that pales in comparison to the unsustainable growth rates observed in 2021. Warehousing and Inventory continue to grow at a similar pace to the one we have observed over the last 18 months,” LMI authors said in a statement. “Inventory levels are unseasonably high, packing warehouses to the gills and driving costs up for both inventory and warehousing.”

The LMI is researched and released every month by business professors at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada-Reno, and in conjunction with the Council of Supply Chain Management Professionals. The LMI is calculated using an index in which any reading above 50% indicates that logistics is expanding; a reading below 50% is indicative of a shrinking logistics industry.

“The downward shift in the index continues to be driven by a loosening in the transportation market, as more capacity comes online and prices decrease,” the report said.

Meanwhile, the May DAT Truckload Volume Index climbed to 256 compared to 212 for the same month a year ago. However, when measured month-to-month, the index declined from 273 to 256.

The index is an aggregated measure of dry van, refrigerated and flatbed loads moved by truckload carriers. A baseline of 100 reflects freight volume in January 2015.

Ken Adamo

Adamo

Like ATA’s Costello, DAT Chief of Analytics Ken Adamo said his group is also seeing more freight moving from the spot market to contracts.

“Demand for truckload services was solid last month, even on the spot market, where the number of available loads has fallen throughout the year. There were more than 1 million dry van loads on the DAT One network during each week in May, which has happened only once, in 2021,” Adamo said. “However, the price of diesel fuel continued to put downward pressure on spot truckload rates and cause small carriers to be discerning about the loads and terms they accept. We expect this volatility to continue through June.”

The national average van rate fell 7 cents to $2.69 per mile, which DAT said is equal to the May 2021 average. The spot reefer rate was $3.06 per mile, down 7 cents, and the flatbed rate added 3 cents to $3.44 per mile.

 

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