Pace of Freight Volume Growth Slowing Down

Although the freight market in 2012 thus far has shown slow gains in shipment volume, the pace of growth has been more sluggish than in the past two years, with a steady decline since January. The Cass Freight Index indicated that North American freight volumes only rose 1.9% in April from the previous month, which was a smaller increase than in February and March where the growth progressively diminished from 2.5% to 2.1% respectively.

The growth rate in April is only a mere 0.2% above that of the previous year, March shipments were 1.3% lower than last year and, although freight tonnage in 2010 and 2011 grew at the more robust rate of 5.8%, the American Trucking Association (ATA) is projecting much slower growth of less than 3% in 2012.

Cass stated that the unseasonably sluggish rate of growth is likely due in part to record high inventories in combination with a drop in demand.

According to ATA chief economist, Bob Costello, first quarter trucking industry performance is “reflective of an economy that is growing, but growing moderately. The pace of freight definitely slowed from the torrid pace in late 2011.” He added that a rate under 3% is “more in line with normal growth” and not a cause for concern.

Analysts at Cass also noted that hauling distance has been declining while truck tonnage has experienced an upward trend in the American Trucking Associations’ Truck Tonnage Index, which means that on a ton-mile basis, freight volumes have actually remained flat or slightly contracted.

The manufacturing activity index released by the Institute for Supply Management experienced a slight increase, as well, in March up to 54.3, managing to stay above 50 which is considered necessary for continued expansion, but in contrast, new orders were down 0.4%, believed to be a future indicator for freight shipments.

Additionally, not all freight hauling modes experienced gains in volume. For example, rail carloads declined 2.2% during the first three months of the year as compared to the prior year’s same timeframe, whereas intermodal truck shipment loads rose 2.4% over the previous year.

Changing truck capacities and lack of driver availability may also play a role in 2012 freight volumes and modes of hauling. Capacities have been declining, carrier fleets are not being expanded, and many trucking companies are parking their equipment due to a shortage of truck drivers, which may have a significant impact on the industry and has already led to some carriers shifting to intermodal loadings to make up the difference.

Although freight volume growth has been slowing, the Cass report makes it clear that “If freight volumes pick up, the 20% loss of capacity and the productivity losses due to new regulations will be quickly felt. Many in the sector have turned to an asset-light model, and capacity will not be able to be added quickly.”

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