CASS April Report and Forecast

April Shipment Volumes


Shipment volumes inched up 1.5 percent from March, a growth rate much slower than the previous two months. That said, however, April freight shipments were 5.5 percent higher than a year ago, when volumes were moving in a downward direction. The trucking industry has edged even closer to 100 percent utilization, indicated by the substantial rise in the March FTR Trucking Conditions Index. The overall demand for spot market truck capacity has been very high as well. Reduced productivity caused by regulatory drag and the negative impact of the winter weather have pushed capacity to its limits. To receive this report on a monthly basis, sign up at http://bit.ly/s9iniq.
Although the second quarter started with continued growth, most of the backlog related to winter weather has been cleared out and it appears that the early run of strong growth in freight will moderate in the second quarter. Manufacturing is coming back from its lull, but production edged slightly downward. New orders were flat, while the backlog of orders dipped 3.5 percent. Truck sales have been building: Class 8 truck orders grew 25.6 percent in March - the largest gain since mid-2012 - followed by another 5 percent rise in April. On the unemployment front, about 288,000 jobs were added to the economy in April, with the transportation and warehouse sector accounting for 11,300 of those jobs and trucking adding 6,800. Even more important for carriers is the 32,000 jobs that were added to the construction sector, as that industry’s employment hit a five-year high. As the volume of construction projects grows, so does the amount of freight moved to support these projects. Freight volumes are up 12.0 percent since the first of the year.


April Freight Expenditures


Freight expenditures increased for the third straight month. April’s 2.8 percent hike follows a 5.4 percent rise in March and an increase of 6.8 percent in February. The tight capacity in the trucking sector has translated to rate increases, particularly in the spot market during the winter weather freight backlog. The fact that expenditures grew at almost twice the rate as volumes indicates that some ground was still gained in the rate arena. Higher rates are not coming fast enough, however, to save some trucking companies that are succumbing to higher costs. Avondale Partners reports that bankruptcies are on the rise again, having more than doubled from first quarter 2013 to first quarter 2014. First quarter bankruptcies were up 40 percent from the fourth quarter of 2013 and took almost 11,000 trucks out of the fleet. Increasing costs, especially in driver training and retention, without corresponding rate increases are pushing many companies to the brink.


Overall Picture


Although the overall economy had its worst showing in several years, with GDP growing at only 0.1 percent in the first quarter of 2014, the outlook for freight remains solid. The winter weather cannot be blamed for all of the economy’s doldrums, but it did cause some considerable pain for the freight sector. Despite that, freight volume was strong and, though moderating, will continue to expand. Growth in employment and manufacturing in some key sectors such as construction and motor vehicles is an indicator that the economy is strengthening. The fast-paced freight expansion from the first quarter should settle into moderate growth in the second quarter.