Truck Tonnage Rises 1.4% in December
Back-to-Back Increase Is First Since Mid-鈥06
This story appears in the Feb. 4 print edition of Transport Topics.
December truck tonnage increased by 1.4% from year-ago levels, the first back-to-back improvement in freight volume since May and June 2006, American Trucking Associations reported in its national index.
A major load board also said the spot market for truckload shipping has been on the upswing, but the good news on tonnage occurs against a backdrop of economic uncertainty, as demonstrated by the Federal Reserve鈥檚 recent substantial reduction in interest rates and the anemic fourth-quarter gross domestic product report from the Commerce Department last week.
In a Jan. 25 preliminary report from ATA, the trade association said tonnage hauled by its members rose to 116.7 from an updated index level of 112.1 in November.
Tonnage rose by 3.4% from October to November (1-7, p. 1). ATA鈥檚 report is based on a survey of members and compares results to a year 2000 base reading of 100 points.
鈥淚t鈥檚 hard to interpret these numbers,鈥 Bob Costello, ATA鈥檚 chief economist, said in an interview. 鈥淵ou can鈥檛 say, 鈥楾hese are signs of new life.鈥 It鈥檚 too early to make that statement, but better these results than coming up short.鈥
Costello said he is cautious, in part, because he talks to fleet executives, and many of them are still doing poorly.
鈥淚n good times, nearly everyone is doing great. But now, some are good and some are still terrible. Carriers are not in unison,鈥 he said.
There was some good news on business to come as the Commerce Department said Jan. 29 that orders for durable goods jumped by 5.2% in December.
Also, TransCore LP said its 3sixty Freight Match load board has seen a sustained rise for several months. Loads posted 鈥 meaning shippers looking for trucks 鈥 increased by 25% in October, 37% in November, 62% in December and a preliminary 65% for January, said David Schrader, a company vice president.
鈥淲e鈥檝e seen a continuation in strength for load volumes; it鈥檚 a definite improvement,鈥 he said.
However, C.H. Robinson Worldwide, North America鈥檚 largest broker of truck freight, saw things differently.
鈥淚nclusive of fuel, our truckload rates increased approximately 3%; excluding estimated impacts of fuel, rates decreased approximately 3%,鈥 Robinson reported as part of its Jan. 29 quarterly statement.
Perhaps the loudest expression of economic worry came from the Federal Reserve. On Jan. 30, the Fed cut its key target for short-term interest rates to 3% from 3.5%, only eight days after it sliced the rate by three-quarters of a point.
The Fed is often content to leave the target rate unchanged and typically moves in quarter-point increments when it does act.
鈥淭his is very astounding,鈥 Costello said. 鈥淭hese two actions in less than 10 days, that鈥檚 a very aggressive policy move,鈥 he said. When the central bank attempts to lower interest rates, it is considered an act of economic stimulus by boosting activity through easier credit.
The same day as the Fed鈥檚 second rate cut, Commerce said GDP growth all but stood still during the fourth quarter. It estimated expansion at an annual rate of 0.6%.
During the third quarter, it grew at an annualized 4.9% rate.
Also on Jan. 30, UPS Chief Ex-ecutive Officer Scott Davis said during his company鈥檚 earnings conference call that 鈥渆conomic uncertainty will make 2008 more challenging than last year鈥 (see story, p. 5).
Looking at his parcel-delivery business, which ranks No. 1 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, Davis said December was the best month of three during the fourth quarter. In January, he said, UPS posted 鈥渟low growth, but it鈥檚 growing.鈥
Through October, the ATA tonnage index declined on a year-over-year basis in 14 of 16 months. With the market beaten down, Costello said good comparisons are easier to make.
In other economic developments, the housing industry continued to suffer. New home sales fell by 4.7% in December, Commerce said Jan. 28, capping the biggest annual decline on record.
As for the sale of all homes, new and existing, sales fell 2.2% in December, said the National Association of Realtors. That decline marked the biggest annual slump since 1982. The housing industry is a heavy user of flatbed and dry van transportation.
In its fourth-quarter earnings report, J.B. Hunt Transport Services, the nation鈥檚 second-largest truckload carrier, said 鈥渇reight demand remained very soft throughout the quarter鈥 in its over-the-road business.
On the less-than-truckload side, Con-way Inc. CEO Douglas Stotlar said his company was facing 鈥渁 challenging economic environment that clearly affected our full-year results.鈥
Con-way鈥檚 quarterly operating profit for LTL work declined, relative to the 2006 fourth quarter, but the corporation did add a large new truckload division with the 2007 acquisition of Contract Freighters Inc.
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