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June 4, 2007 7:55 AM, EDT

U.S. Truck Freight Falls

Decline Is Ninth in Past 10 Months

By Jonathan Reiskin, Associate News Editor
This story appears in the June 4 print edition of Transport Topics.

Truck tonnage in the United States declined again in April — for the ninth time in the past 10 months, as measured against the previous year — showing the effects of a national economy in continued flux.
American Trucking Associations’ monthly tonnage index showed that freight was down in April by 2.7%, compared with April 2006, and down 2.2% relative to March. Tonnage rose in March for the first time since June of last year.
Also in April, the truckload spot market, as measured by a major load board, remained softer than it has in recent years.
In the nine monthly readings since July 2006 ATA’s index has bounced up and down without a clear direction or trend.
“The economy has been in transition from better growth to lower growth. Now it’s OK and hopefully, it will get better,” ATA’s chief economist, Bob Costello, said in an interview.
“There has been a choppiness to the freight economy through April and anecdotally, we’ve heard it continuing into May,” he said.
The preliminary April reading for the tonnage index from the May 25 report was 112.1, down from 114.6 in March and 115.2 in April 2006. The index is based on a monthly survey of freight volumes hauled by ATA members and compares business activity with a base level from 2000.
The low-growth assessment was born out by the Commerce Department’s May 31 revision of gross domestic product, which said the economy grew by just 0.6% a year during the first quarter, down from an original estimate of 1.3%. In contrast, the U.S. economy grew by 2.5% a year during the fourth quarter and by 3.2% for all of 2006.
Commerce also reported that durable goods orders rose for a third straight month in April, but the Association of American Railroads said that through May 18, intermodal freight volumes were down for 10 straight weeks from the corresponding time in 2006.
Meanwhile, the Conference Board’s leading economic indicators declined in April, but the Federal Reserve said industrial production increased.
At TransCore 3sixty, Vice President David Schrader follows the ratio of loads-to-trucks. He said this year started off with the lowest ratios — demonstrating weak demand for trucking services — since the 2001 recession, but there has been a modest rebound.
“The downturn in tonnage that we saw on the spot market started in April or May of last year. We expected in the early spring there would be an uptick, and there has been, but not as much as anticipated,” said Schrader, who works on freight business services for TransCore.
As an example, he said that in January, on average, 1.1 trucks were chasing each load of freight that was offered by brokers. In January 2005, though, each truck seeking work could choose among at least three loads.
By April more than 2.5 loads were offered for each truck, but that ratio paled when compared with the four or five loads that were offered in April 2005 and April 2004, respectively.
Schrader warned that fluctuations in the load-to-truck ratio do not correspond precisely with industrywide percentage changes in truck tonnage. Instead, he said, the ratios help to clarify current spot-market conditions.
Scott Arves, chief executive officer of truckload carrier Transport America, said his Eagan, Minn., company is doing well because he has reduced fleet size by 3% from a year ago.
“Many people hung onto some excess capacity for too long, thinking the boom times would last forever, but what we’re seeing now in tonnage is not an anomaly. It’s an established trend,” he said.
Arves said, at his company, consumer staples of daily living are providing good volumes, but the automotive, housing and heavy-manufacturing sectors are lagging. He described the overall operating environment as “challenging.”
As a result of soft freight levels, he said, some shippers are accelerating normal contract negotiation schedules and trying to lock in lower prices.
“They’re taking an advantage of an opportunity,” Arves said. “Some are putting out their business for bid early, and other shippers are trying to cleanse themselves of carriers that don’t offer a good service proposition.”
Daylight Transport, a Long Beach, Calif., less-than-truckload carrier, has seen strong volumes from consumer electronics and automotive aftermarket shippers, said Chief Operating Officer Steve Vaughn. In contrast, he said, back-to-school clothing, which usually enters the supply chain now for sale in September, has been lagging.
Vaughn said Daylight, which provides longhaul transport using owner-operators and small fleets, is doing well but under unusual circumstances.
“Our business by month used to be very predictable, but we’ve had to throw out all of those forecasts since April. We’re trying to understand this, but they are not typical patterns for us,” Vaughn said.