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Truck tonnage in August surged 7.4% to 119 when measured against the same month a year ago, and on a sequential basis it rose 2.8% from July, according to American Trucking Associations.
The federation’s For-Hire Truck Tonnage Index is dominated by contract freight as opposed to spot market freight.
In August, the index was 119 versus 115.8 in July. (It equaled 100 in 2015.)
ATA Chief Economist Bob Costello released the index Sept. 20, and said the year-over-year increase was the largest gain since 2018 and the month-over-month jump is the biggest since 2019.
“Tonnage snapped back in August after a weaker-than-expected July,” Costello said. “With the economy in transition to slower growth and changing consumer patterns, we may see more volatility in the months ahead. But the good news is that we continue to witness areas of freight growth in consumer spending and manufacturing, which is helping to offset the weakness in new home construction.”
The August increase is the 12th consecutive year-over-year gain, and Costello pointed out that the index in July also was up 4.7% from a year earlier. For the first eight months, the index is up 3.9% when measured against 2021 results.
Trucking serves as a barometer of the U.S. economy, representing 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. Motor carriers collected $732.3 billion, or 80.4% of total revenue earned by all transport modes.
After a down July, for-hire truck tonnage (TL and LTL) snapped back in August, +2.8% from July and +7.4% from Aug '21. Level of tonnage is back to 2019 levels, which is the all-time high.— Bob Costello (@ATAEconBob) September 20, 2022
Meanwhile, the monthly Logistics Managers Index shows an overall slowing transportation sector in August. The LMI registered 59.7 in August, compared with 73.8 in 2021. It marks the first reading to be below 60 since May 2020, according to one of the survey’s authors, Arizona State University business professor Dale Rogers. He added that this is the third consecutive reading below the all-time index average of 65.3.
“The logistics industry is currently facing an interesting mix of decreased consumer demand, but with an abundance of goods throughout supply chain systems,” Rogers said. “The dynamic at work is somewhat similar to what we saw during the early days of COVID when distribution networks became constipated with inventories due to an unexpected drop in consumer demand.
“As always, the story behind this month’s reading is nuanced, with a mix of both positive and negative economic indicators. This mix has resulted in the tightest warehousing market we have seen in years, along with the loosest transportation market.”
However, the LMI is still in positive territory as any reading above 50.0 indicates growth, while a reading below that level indicates contraction. As the Federal Reserve announced a three-quarters of a point rate hike Sept. 21, Rogers said he believes the index’s decline is tied to a slowing economy and the impact of higher borrowing costs.
“We mentioned last month that much of the inflation that is happening in the U.S. and throughout the world is caused by supply problems and not the traditional ‘demand side’ inflation that the Federal Reserve is good at handling,” Rogers said. “The Fed has begun to recognize that solving inflation this time will be quite different than previously. This is something we are watching closely.”
The LMI is researched and written every month by team members from 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.
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Meanwhile, the August Cass Freight Index increased a strong 3.6% year-over-year to 127.8, compared with 123.4 a year ago, and the index was up 6.6% when measured against July’s figure of 119.9. The index equaled 100 in 1990.
However, the authors of the report are cautioning they believe the interest rate hike and a shift by consumers from purchasing a high percentage of goods, as they did during the pandemic, and to a more balanced spending pattern of goods and services, will slow the transportation sector in the coming months.
“The improvement may not be sustainable, especially as pressure increases on interest-rate-sensitive sectors like capital goods and housing, but the summer improvement likely reflects a combination of successful discounting campaigns by retailers, seasonal inventory building ahead of the holidays, easing supply constraints, particularly in auto production, and the reversal of China lockdown effects in June and July,” Cass said.
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Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said the Federal Reserve’s interest rate hikes will put the brakes on inflation and it could be cut in half by this time next year.
“Curing inflation will be a year-and-a-half process,” Dhawan said. “A very determined Federal Reserve will eliminate excess demand by hiking interest rates sufficiently.”
Dhawan said his projections do not show the U.S. economy enduring several years of inflation as it did in the late 1970s and early 1980s, which required hiking interest rates to record levels and having the economy slide into a deep recession in 1981 and 1982 to slow inflation and eventually return the economy to positive growth in 1983.