Freight expenditures moved up again in April, hitting its highest point in fifteen years, according to the latest Cass Freight Index.
At the same time, North American shipment volumes rose to their highest level since June 2011.
“Although the performance of the economy overall was very weak, freight has continued to gain momentum, indicating that the second quarter should be stronger,” said Rosalyn Wilson, supply chain expert and senior business analyst with the management consulting firm Delcan Corp., who provides analysis for the report
Shipment volume in April inched up 1.5% from March, a growth rate much slower than the previous two months, however, April freight shipments were 5.5% higher than a year ago, when volumes were moving in a downward direction.
According to Wilson the trucking industry has edged even closer to 100% utilization, while overall demand for spot market truck capacity has been very high as well.
Freight expenditures increased for the third straight month during April while its 2.8% hike follows a 5.4% rise in March and an increase of 6.8% 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,” said Wilson. “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.”
She pointed out the investment firm 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% from the fourth quarter of 2013 and took almost 11,000 trucks off the road.
“Increasing costs, especially in driver training and retention, without corresponding rate increases are pushing many companies to the brink,” she said.
Wilson also said while the overall economy had its worst showing in several years, during the first quarter, 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” she said. “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.”
The Cass Freight Index represents monthly levels of shipment activity, in terms of volume of shipments and expenditures for freight shipments and is based upon the domestic freight shipments of hundreds of Cass clients representing a broad spectrum of industries.