The economic mood was more optimistic than cautious at the SMC3 JumpStart 2014 conference in Atlanta this week, as trucking and logistics executives reported stronger than usual freight volumes and demand in late 2013 and early 2014.
The mounting evidence for an improving economic outlook and freight demand is more than anecdotal. Truck tonnage rose 0.6 percent in December after surging 4.7 percent in November, according to the American Trucking Associations. Year-over-year, the ATA For-Hire Truck Tonnage Index was up 8.2 percent in December.
Spot market truckloads posted on DAT Load Boards rocketed in early January, rising 74 percent in the week of Jan. 5, including an 85 percent increase in dry van loads. Freight activity and rates remained elevated for the season in mid-January. The Jan. 18 average DAT dry van per mile spot rate of $1.95 was up a penny from the previous week and flat with the end of December, but was 22 cents higher than a year ago. According to DAT, $1.95 per mile was the peak price for 2013.
Some of that additional freight may be spillover from other modes — whether rail or express — that are dealing with holiday backlogs, or a temporary freight shift brought about by extreme cold weather hampering rail and intermodal drayage operations.
And then there’s the early Chinese New Year, which falls on Jan. 31 this year. Shippers tend to stock up in advance of the Chinese holiday, which officially lasts six days, although the impact on manufacturing and exports can last much longer.
“When the Chinese New Year falls in January, you tend to see freight volumes on average above seasonal levels, but they fall back to normal weakness in February,” said Benjamin J. Hartford, senior equity research analyst at R.W. Baird & Co.
But shippers and transportation companies hope a stronger-than-usual January points at least in part to a steadier recovery and more growth in 2014.
For a better estimate of how strong freight demand and the U.S. economy will be in 2014, wait until March, Hartford told more than 400 executives at the Jan. 19-22 event. “Watch March. March will matter for the direction of this recovery,” he said.
Even before freight hits the docks in March, Hartford sees a better year ahead for transportation companies, supported by increased manufacturing, the “energy revolution” and hopefully a stronger and more confident consumer.
“We do expect U.S. and global growth to reaccelerate,” the research analyst said. “There is real momentum within the industrial landscape in the United States.”
Based on the record of previous recoveries, “we could see 20 percent more growth in the industrial economy through the balance of this cycle,” Hartford said.
Manufacturing in December expanded at the second-fastest pace since April 2011, according to the Institute for Supply Management. The ISM’s new orders index increased 0.6 percentage points to its highest level since April 2010, the ISM said.
In another sign of underlying economic strength, the Conference Board Leading Economic Index for the U.S. increased 0.1 percent in December, following a 1 percent increase in November and an 0.1 percent increase in October.
“The U.S. LEI continues to point to gradually strengthening economic conditions through early 2014,” Ataman Ozyildirim, a Conference Board economist, said Thursday. The organization’s coincident and lagging indexes also rose.
U.S. gross domestic product will increase 3 percent this year over 2013, Don Ratajczak, consulting economist at Georgia State University, said at the SMC3 conference. He kicked his prediction up from the 2.6 percent consensus. “If I’m going to go away from the consensus, I’m going higher rather than lower,” he said.
Ratajczak also predicted increased manufacturing and said companies are going to have to increase utilization and industrial capacity to meet demand.
Manufacturing capacity, excluding oil, is currently growing at a 1.6 percent rate, he said. “Manufacturing activity is growing twice that. If business wants to maintain growth, they’re going to have to start to invest in capacity expansion.”
But there still are caveats. “The recovery is still tenuous,” and depends largely on how much consumers will be willing to spend in 2014, said Hartford. “The consumer is already showing signs of healing,” he said. “The reindustrialization of the U.S. is real, is under way and it is transformative. It will help repair the consumer.”