Mixed signals lead the way for May Cass Freight Index Report

Mixed results in both the freight sector and the general economy were again front and center in the May edition of the Cass Freight Index Report.

The Cass Freight Index accurately measures trends in North American shipping activity based on $20 billion in paid freight expenses of roughly 350 of America’s largest shippers, according to Cass officials.

As LM has reported, many trucking industry executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

Freight shipments—at 1.132—in May were down 0.3 annually and up 2.9 sequentially compared to April. May represents the 34th consecutive month shipments topped the 1.0 mark since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008.

And freight expenditures at 2.383 were down 2.6 percent annually and up 0.04 percent compared to April.

The Cass Freight Index report observed how these mixed results are an accurate reflection of the ongoing stop and start nature of the economy, citing declining employment and weak job creation, a higher GDP than this time a year ago, a slowing manufacturing sector, eroding inventories, coupled with increasing inventory-to-sales ratios, increased container traffic at ports that is in line with increased domestic shipments, and up and down import and export activity, which is currently at a lower level than it was at the end of 2012.
 
Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, wrote in her analysis of the report that in looking at the shipment data in the report there does not appear to be a strong signal that freight is recovering.

Rail shipments in May showed gains, with carloadings up 2.1 percent and intermodal seeing a 3.2 percent gain. Much of the gains on the tracks were driven by crude oil shipments, which were up 26.8 percent in May, according to the Association of American Railroads. And truck shipments also showed increases for the month, with trucking shipments up 5.7 percent annually through May.

Looking at expenditures, Wilson said they were basically the same in May as they were in April and have been flat throughout most of 2013. Contributing to this, she wrote, is that truck capacity and demand are well balanced, with truck rates putting downward pressure on intermodal rates. But she added that could be subject to change when new truck driver Hours-of-Service rules take effect next month, which could reduce truck productivity and capacity, and see the industry raise rates to match demand and also remove some of the pricing pressure and driver intermodal rates up, too.

Declines in the manufacturing sector in recent months, as noted in LM yesterday with the Institute for Supply Management’s May Manufacturing Report on Business showing the PMI, its index used to measure manufacturing growth, below its benchmark level for growth of 50, could spill over into the freight sector, as Wilson noted that when manufacturing declines, the freight sector follows.

Charles W. “Chuck” Clowdis , Jr., Managing Director-Transportation Advisory Services, at HIS Global Insight, candidly explained to LM that this report speaks to the fact that there are still no signs of consistent recovery.

“We are looking for even small signs so even a ‘less sluggish’ description seems to make us feel better,” he said.  “HOS will shake up capacity availability and mid-year GRI’s will tell a lot about the confidence of carriers to raise their rates in a ‘less sluggish’ freight market.  Is anyone else tired of this wait and see game we’ve been playing for so long?  Keep the faith….maybe next month will give us a clue as to a sustainable recovery.”