Freight Projected to Stay in the Slow Lane
ATA’s for-hire truck tonnage index contracted 0.9% in August after increasing 0.4% in July, and while the sequential drop in August did not completely erase the combined 1.5% tonnage gain of June and July, the slippage remains – in the words of the group’s top freight prognosticator – “significant.”
“While there has been acceleration in housing during the last few months, truck tonnage is being weighed down by a flattening in manufacturing output and an unintentional increase in inventories throughout the supply chain,” noted Bob Costello, ATA’s chief economist Bob Costello. “While choppy, tonnage has essentially been flat this year with August being the second lowest month of the year.”
“August was not a particularly good month for the U.S. recovery,” added Nigel Gault, an analyst with research firm IHS Global Insight.
“Retail sales got a boost from higher gasoline prices and auto sales, but most other categories simply treaded water,” he said in a statement. “Manufacturing output plunged, with across-the-board losses in most industries, [while] the cost of living jumped as a result of rising food and energy prices.”
Gault stressed, though, that core rates of inflation were more subdued in August and are now exhibiting a downward trend.
“Not all the news was disappointing, however,” he added. “An early-September reading on consumer confidence showed a surprisingly strong gain despite higher gasoline prices, raising hopes that this month could be better than last.”
Indeed, the Conference Board’s Consumer Confidence Index (CCI) increased to 70.3 in September, up from 61.34 in August, while the firm’s Expectations Index (EI) increased to 83.7 from 71.1 over the same two-month stretch.
“The CCI rebounded in September and is back to levels seen earlier this year,” noted Lynn Franco, director of economic indicators at the Conference Board, noting that the highest CCI reading so far this year occurred in February when it reached 71.6.
“Consumers were more positive in their assessment of current conditions, in particular the job market, and considerably more optimistic about the short-term outlook for business conditions, employment and their financial situation,” she added. “Despite continuing economic uncertainty, consumers are slightly more optimistic than they have been in several months.”
However, despite the uptick in confidence, freight figures remain on a downward slope as ATA’s Costello also noted that the group’s tonnage index in August dipped 0.3% below January and is off 1.4% the year’s highest reading, which occurred in March.
“Expect tough year-over-year comparisons to continue through the rest of the year,” he said, stressing that the U.S. economy isn’t expected to grow much in the second half of the year as manufacturing decelerates and excess inventories are worked off.
“As a result, tonnage is expected to increase less than 3.5% in 2012,” Costello noted.