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posted on 25 March 2020

Trucking Industry Growth Improved In February 2020 - No Obvious Coronavirus Impact

Written by Steven Hansen

Headline data for the American Trucking Association (ATA) and the CASS Freight Index show that truck volumes improved but significantly differ on year-over-year growth.

Analyst Opinion of Truck Transport

The CASS index is inclusive of rail, truck, and air shipments. The ATA truck index is inclusive of only trucking industry member movements (ATA's tonnage data is dominated by contract freight). Even so, CASS breaks out trucking and claims it is down 7.5 % year-over-year and up 6.2 % month-over-month Vs. up 2.6 % year-over-year and up 1.5 % month-over-month for the ATA.

I put a heavier weight on the CASS index which is consistent with rail and ocean freight. It is not logical that truck freight goes up when industrial production and ocean freight decline - not to mention the continuing effects of the trade war and the coronavirus.

Econintersect tries to validate truck data across data sources. It appears this month that the truck employment rate of growth continues to slow. Please note using BLS employment data in real-time is risky, as their data is normally backward adjusted (sometimes significantly). Additionally, Econintersect believes that the BLS is not capturing all truck employment.


ATA Trucking

ATA's February truck tonnage rose 1.8 % after falling 0.3 % in January.

Said ATA Chief Economist Bob Costello:

Before any impacts from COVID-19, truck tonnage had a solid month in February. Last month, solid housing starts, high levels of retail sales, and even a modest improvement in manufacturing activity all helped freight volumes. With truck tonnage up nicely from a year earlier in February, the trucking industry was in a fairly good place before economic impacts hit from the health crisis. Trucking volumes, early in the COVID-19 emergency, will be positive for consumer staples and other commodities before we see a slowdown as the economy contracts in the second quarter.

ATA Truck tonnage this month

z truck.png

source: ATA


CASS FREIGHT INDEX REPORT

The following was reported by CASS:

Shipment volumes dropped 7.5% vs February 2019 levels (Chart 1), but the index improved sequentially from a low point. January may have been the bottom, but the coronavirus concerns leave open the possibility for a "double dip" or at least a delay in improvements. Of concern, the Port of Los Angeles just reported a 23% y/y drop in imports for February.

z truck2.png

The turn of the calendar didn't leave the bad news in 2019, as the Cass Freight Index showed continued weakness in the U.S. freight market. Both the shipments and expenditures components of the Cass Freight Index worsened sequentially and showed decelerating y/y growth. According to the broader stock market levels, there is still optimism out there, but the freight trends have yet to turn. And the Covid-19 coronavirus case count continues to grow, creating uncertainty around containment and eventual impact on global supply chains. Some Chinese factories resumed operation this past week, but they are still not close to 100% production levels. Others have pushed re-opening back to March 1.

As stated last month, we expect 2Q20 to have the best chance of showing actual y/y growth in domestic U.S. shipments and freight costs, if traditional seasonal freight patterns hold, because 2Q19 was below average in terms of the seasonal surge in activity. Plus, depending on how the aforementioned coronavirus affects supply chains, there could be a 2Q20 wave of import activity (and therefore truck and intermodal) when the Chinese export machine starts churning again.

Shipment volumes dropped 9.4% in January vs 2019 levels (Chart 1), as the index posted its lowest absolute reading in roughly three years. It was also the steepest y/y decline since 2009. This follows a sluggish end to 2019, where many blamed last month's weakness on timing of the holidays. There could have been a residual impact post-New Years, but with the negative y/y and sequential decline, and the deceleration in the y/y growth rate, we don't see much good news in this volume number.

z truck1.PNG

Source: http://www.cassinfo.com/Transportation-Expense-Management/Supply-Chain-Analysis/Cass-Freight-Index.aspx



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