Fleet Management

Freight Expenditures Hit Record High During June

July 08, 2014

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The freight logistics sector continued to strengthen in June, with both shipment volumes and expenditures rising once again, according to the latest Cass Freight Index.

June shipment volumes increased 2.4% to the highest level since November 2007, just before the recession. Volumes were 6% higher than a year ago and are up 15.8% since the beginning of 2014.

“Construction and manufacturing activities, both drivers of demand for transportation services, have been rising for several months," said Rosalyn Wilson, supply chain expert, who provides analysis for the report.

She noted the Institute for Supply Management’s Purchasing Managers Index slipped just slightly from 55.4 to 55.3 during June, but there was strong growth in the manufacturing of autos and construction equipment. New orders rose 3.5%, indicating that demand for transportation should remain strong for the next several months.

“Despite record levels of new equipment orders, a lack of drivers is restricting growth in truck capacity,” Wilson said. “In tonnage terms, truck volume has been rising consistently in 2014, according to the American Trucking Association. Railroad carload and intermodal traffic have posted solid gains.”

The freight expenditures index rose 4.2% in June to 2.76, a record high. June 2014 freight spending was 12.1% higher than a year ago and is up 15.6% since the beginning of 2014.

“When you look at the truckload sector, the Cass Truckload Linehaul Index also shows that rates have been higher in each month of this year than last year,” Wilson said. “Rail rates have been on the rise since the beginning of the year, also pushing up transportation costs. The combination of tight capacity and higher shipment volumes will push expenditures up faster in the remainder of 2014.”

As for the overall economy and its effect on transportation, Wilson said there is little need to worry over recent figures showing the nation’s gross domestic product contracted at an annual rate of 2.9% in the first quarter of the year.

“There is not necessarily a direct correlation between GDP and transportation. For instance, declining inventory levels and increasing imports are positives for the transportation sector but negatives for GDP,” she said. “Despite some talk that the slowing and then contracting economy could signal another recession, the foundation and building blocks for a growing economy are stabilizing and growing.”

She noted sales of both new and existing homes are increasing, industrial and government construction have been up for the last several months, and manufacturing has been largely growing for close to a year. And while retail sales have yet to show signs of significant growth, but they are not shrinking either, and consumer confidence levels have surpassed pre‐recession levels.

“The current growth sectors in the economy depend on transportation services, so the outlook remains good for transportation,” Wilson said.

The Cass Freight Index represents monthly levels of shipment activity, in terms of volume of shipments and expenditures for freight shipments, in which Cass Information Systems processes more than $22 billion in annual freight payables on behalf of its clients. The index uses January 1990 as its base month. 

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