US truck index signals rebounding demand

US truck index signals rebounding demand

A Werner Enterprises truck on Interstate 40 in Arizona. Some data shows the trucking industry is contracting while others have a stronger view of business conditions. Photo credit: Wikicommons.

Despite gloomy indicators from some quarters, a closely watched index shows trucking industry conditions might not be all that bad.

The American Trucking Associations' (ATA's) Truck Tonnage Index rose 7.3 percent year over year in July to 122.7 on a seasonally adjusted basis, the group said Tuesday. The non-seasonally adjusted index, which represents the change in tonnage actually hauled, was up 7.2 percent to 112.8.

The index, which has not been negative since April 2017, uses a base of 100 to represent conditions in 2015. 

“Tonnage in 2019 has been on a rollercoaster ride, plagued with large monthly swings, which continued in July as tonnage surged after falling significantly in May and June,” said ATA chief economist Bob Costello. “However, take out the month-to-month noise, and you see that truck tonnage is still on a nice upward path.”

Most other indicators provide a gloomier view of trucking. The Cass Freight Shipments Index was down 5.9 percent in July year over year and has been down since December 2018. The Cass Freight Expenditures Index was down 1.4 percent in July and has been negative twice in the past three months. The Cass Truckload Linehaul Index was flat in July and is poised to turn negative in August for the first time since March 2017. 

Economist Donald Broughton, who authors the Cass Freight Index, said last week the data was “signaling an economic contraction.”

DAT Solutions has truckload contract rates 8.3 percent lower than a year ago, while a DAT and JOC.com analysis shows spot truckload rates down more than 20 percent in the same period. 

Why the difference in the data?

Whether it’s ATA, Cass, DAT, or a JOC.com analysis, each is taking a different snapshot of transportation.

ATA provides a volume index, but one that is calculated on tonnage rather than shipment counts. 

“It is important to note that ATA’s tonnage data is dominated by contract freight, which is performing significantly better than the plunge in spot market freight this year,” Costello said.

That is a key difference because the spot market represents only about 15 to 17 percent of full truckload, according to industry experts. Contract freight represents about 85 percent, an important fact to remember when making wide-ranging conclusions about trucking based on the spot market.

The Cass Freight Index is also not exclusively a trucking index; the data includes railroad and air freight, which have ties to the international economy.

“We maintain hope there will be a trade deal because both China and the US have to reach one," Broughton said. “But the Asian air freight volumes continue to suggest a growing risk that one or more of the Asian economies [China, South Korea, and Singapore] is already sliding into recession. The current civil unrest in Hong Kong only increases the risk of an economic contraction.”

Shippers are paying attention to these issues because uncertainty leads to higher inventories, as seen in January, and the slowdown of freight movement, which could last through the end of this year.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.