Truck Tonnage Rises 7.4%

By Rip Watson, Senior Reporter

This story appears in the Aug. 30 print edition of Transport Topics.

Truck tonnage in the United States rose 7.4% in July from a year earlier, the eighth consecutive monthly gain, American Trucking Associations reported last week.

Tonnage also was up 1.5% from the previous month, the federation reported, signaling that freight continues to grow despite mounting concerns over the pace of the economic recovery.

ATA said Aug. 25 that its advanced seasonally adjusted index rose to 110 in July. The latest report left the index almost exactly where it stood three months earlier — at 110.2.

“The economy is slowing, and truck freight tonnage has essentially gone sideways since April 2010,” said ATA’s chief economist, Bob Costello.

So far in 2010, tonnage has risen 6.7% above 2009 levels, but is still about 5% below the freight levels in the summer of 2008.

Recent indicators reinforced notions of a slowing economy.

The worst economic news last week was a 3.8% drop in durable goods orders, excluding transportation equipment. These are goods intended to last at least three years.

Data also showed that new home sales last month were 15% lower than a year earlier, and sales of existing homes also declined. Partially offsetting the negative housing news was a report that housing starts rose 1.7% in July after sharp declines in the previous two months.

Another positive economic sign was the 1.1% growth in manufacturing activity to the highest level in 22 months. That gain, fueled by stronger auto production, was reported last week by the Federal Reserve and more than offset a 0.4% drop in June.

In addition, the Conference Board’s leading economic index rose 0.1% in July after a 0.3% dip in June. That index is intended to forecast activity in three to six months.

In line with the economic indicators, Costello predicts moderate tonnage growth for the rest of 2010, on both a year-to-year and month-to-month basis.

“After accounting for the reduction in supply [of trucks] over the last few years, even small gains in tonnage will have a larger impact on the industry than in the past,” he said, while declining to predict the percentages.

Another indicator of freight’s future direction was Landstar System Inc.’s midquarter conference call on Aug. 25. The company, which is based in Jacksonville, Fla., tempered expectations, saying volume growth still was above 10%, but was less than previously expected as the quarter has developed.

Financial analysts shared the cautious outlook.

“We expect reported year-to-year growth will continue to decelerate across [transport] modes as comparisons [to 2009 volumes] get increasingly more difficult,” analyst Ed Wolfe said in an Aug. 12 report.

“We believe an economic slowdown is likely,” the founder of Wolfe Trahan & Co. said in a report where the 2011 economic growth forecast was scaled back to 1% from 3%.

Freight growth in recent months has been driven by inventory restocking, he said, and has kept pace with normal seasonal patterns.

Wolfe’s report noted improving trends in nine of 15 freight indicators during July, including rail and ocean freight volumes and sources such as ACT Research’s truck-order data.

Among the indicators cited by Wolfe for moving in a favorable direction were the Cass Freight Index and the Ceridian Pulse of Commerce Index, which both improved on a year-to-year basis.

“Looking ahead, we expect continued progress toward more normal seasonal trends as part of a sustainable recovery, which will result in slowing year-over-year growth,” Robert W. Baird & Co. analyst Jon Langenfeld said in an Aug. 20 report. He noted that last month’s freight volumes actually held up better than the traditional seasonal falloff from June to July.

Baird publishes a freight index that improved 5.6% year-to-year in July after a 6.4% increase on that basis in June.

Credit Suisse analyst Chris Ceraso was more upbeat, forecasting tonnage growth at percentage rates similar to recent months for the rest of the year. After that, freight growth will slow to 4% in early 2011 and eventually to about 2% later next year, he said in a report.

Meanwhile, international cargo volume, particularly imports, continued strong year-to-year growth topping 25%, the ports of Los Angeles and Long Beach, Calif., reported. Containerized export freight also rose sequentially, climbing 4.4%.

Ceraso said Aug. 18 that he believed international cargo levels peaked in July, driven by retailers’ decisions to restock inventory during the summer months.

ATA also said it revised the June index to reflect a 1.6% month-to-month decline, instead of the earlier 1.4%.

The non-seasonally adjusted index, representing actual tonnage, fell 5% from June to July, ending at 109.9.