Truck Tonnage Falls to ’02 Level

This story appears in the May 4 print edition of Transport Topics.

Truck tonnage fell in March to its lowest level in seven years, as it declined 12.2% below the levels recorded one year earlier, according to an April 27 report from American Trucking Associations.

ATA’s survey coincided with the release of a Commerce Department report showing the economy shrank 6.1% in the first quarter, part of the worst six-month stretch of gross domestic product performance since the Eisenhower administration.

Meanwhile, Federal Reserve policymakers last week emphasized that fighting the recession was more important than inflationary concerns at this time, and they kept the target rate for short-term interest rates at a historic low.

Also last week, the domestic automotive industry dominated business headlines as General Motors Corp. further sliced factory jobs and eliminated its Pontiac brand, and Chrysler Motors filed for bankruptcy.

ATA’s preliminary report said its truck tonnage index fell to 101.4, the lowest level since March 2002, early in the recovery following the 2001 recession. The tonnage index was 12.2% lower than in March 2008 and 4.6% below the February reading of 106.3. The index number compares business with activity in the base year 2000.

“Many fleets were telling us during March that freight was getting a little better,” said ATA Chief Economist Bob Costello, who oversees the tonnage survey.

“The problem is that freight should be significantly better in March [as compared with February], which is why the seasonally adjusted index fell. . . . March’s data suggest the industry has not hit bottom just yet,” Costello said.

“Business is off by 30% to 60%, year-over-year, in terms of the number of shipments,” said Bob Peterson, president of flatbed carrier Melton Truck Lines, Tulsa, Okla. “It’s soft everywhere in the country, and there are few rays of hope.”

In a telephone interview during a sales tour with customers, Peterson said December through February was the worst period for his company and its 1,000 tractors. Listening to shippers’ projections, he said he heard some optimism for the end of this year, or 2010, but there was no certainty behind it.

“No one really knows. There’s a lot of guessing. We’re trying to marshal our resources and just remain standing when it’s over,” Peterson said.

The Commerce Department said April 29 in its initial estimate for first-quarter GDP that the economy contracted at an annual rate of 6.1%, similar to the 6.3%-a-year drop recorded in the fourth quarter. Bloomberg News said that was the worst back-to-back performance since late 1957 to early 1958.

GDP growth has been negative in four of the past six quarters ending March 31.

Melton’s Peterson said his carrier mainly hauls manufactured goods, a segment of the economy that has been especially battered. The Federal Reserve’s index of industrial production has been falling since it peaked at 112.4 in December 2007, when the economy entered the recession. Over the past 15 months, factory output has declined by an average of one point a month, to 97.4 in March.

The Fed’s index uses 2002 activity as a base level.

A large electronic load board for freight matching does not show signs of an improving freight environment.

Preliminary April data show load postings 69% below April 2008 levels at the 3sixty Freight Match load board, said David Schrader a vice president at TransCore, the load board’s owner.

The April level is similar to the March total, when volumes ran 65% below the year-earlier levels.

“On a month-to-month basis, April versus March, volume in April was up 6%. The average seasonal uptick in past years between March and April is 8%, so you can see this year’s increase isn’t too far off typical seasonal patterns but at much lower freight levels,” Schrader said.

Peterson said Melton management has been careful to monitor the financial health of customers.

“We’ve had to turn off certain customers with weak credit worthiness. Fortunately, there have only been some small bankruptcies among them,” Peterson said.

ATA’s Costello said he was surprised that trucking fleet bankruptcies have not been greater than the 480 reported last month (4-27, p. 1).

“I don’t want carriers to go out of business but considering the degradation in freight, I’d have thought there would have been more, in, like, the 600 to 800 range,” Costello said.

Cross-border trucking usually has increased this decade, but the Department of Transportation said April 30 that it is contracting.

“Trade using surface transportation between the United States and its North American Free Trade Agreement partners, Canada and Mexico, was 30.9% lower in February 2009 than in February 2008, dropping to $47.9 billion, the biggest year-to-year percentage decline on record. February was the fourth consecutive month with a yearly decline of greater than 13%,” the statement from DOT said.

On April 29, the Fed said it would keep its short-term interest target at 0.25% or less, where it has been since mid-December.

In other economic developments, the Commerce Department said April 24 that durable goods orders fell 0.8% in March. Excluding transportation equipment, orders declined by 0.6%.

Also on April 24, Commerce said the sale of new homes declined by 0.6% in March.