Cass Freight Index Posts Usual Summer Decline
August 13, 2014
The freight logistics sector slowed in July, following a seasonal trend, with both freight shipments and freight payments down 3.9% from the previous month, according to the latest Cass Freight Index.
This drop was consistent with previous summers’ drops and should not be seen as the start of a decline in freight for the second half of 2014, according to Rosalyn Wilson, supply chain expert, who provides analysis for the report.
After five months of increases, shipment volumes decreased 3.9% in July, still coming in 4.2% higher than shipment activity a year ago.
On the expenditures side, the July freight expenditures index fell in tandem with freight shipments, dropping 3.9% from June figures. July 2014 payments for freight are 6.7% higher than the corresponding month a year ago.
"There was not much change in rates in July as capacity loosened with the drop in shipments,” said Wilson. “That said, in recent weeks less-than-truckload carriers have been reporting that their pricing is starting to strengthen, a sign that across-the-board price hikes could be on the horizon.”
She said the softness in the freight transportation market in July should not be seen as part of a longer-term trend downward.
“Even prior to the recession, the summer months were slower before the season rise for the holidays,” Wilson said. “Retailers are still sitting on higher inventories and being cautious about the orders they are placing for new stock."
She believes the turnaround in China’s Purchasing Managers Index for export orders and the continued growth in the U.S. manufacturing sector indicate that freight shipments should be strong in the last four or five months of 2014.
Wilson also noted the first estimate of second quarter gross domestic product was a growth rate of 4%, a significant turnaround from the 2.1% contraction in the first quarter.
“Corporate profits are strong, while consumer sentiment and household wealth are rising, putting both groups in a position to spend more this year,” she said.
The Cass Freight Index uses freight expenditures and shipment volumes derived from $23 billion in freight transactions processed by the invoice management services provider Cass Information Systems annually on behalf of its client base of hundreds of large shippers.