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Freight Shipments Ease as Spending Declines

April 18, 2016

By Evan Lockridge

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Growth in freight shipments slowed in March, according to the latest Cass Freight Index Report, while freight spending turned negative – but a longer-term view of cargo movements and the overall economy appears at least somewhat brighter.

The 1.4% increase in shipments from the month before follows an 8.3% jump in February, putting the shipments index at a reading of 1.070. While this is the highest level since November, it is down 1.5% from March 2015.

March shipments have grown at a slower pace than each February for the last couple of years, so this latest news not unexpected, according to Rosalyn Wilson, supply chain industry analyst and founder and president of the consulting practice FreightMatters, who provides analysis for the report.

“The March 2016 index is still 6.2% lower than the December 2015 index, indicating that the plummet in January is going to take quite some time to dig out of,” she said. “On an average basis, the first quarter of 2016 was 3% lower than the same period in 2015.”

The good news, she said, is that an indicator of U.S. manufacturing in March showed growth for the first time since last August, signaling the sector may finally be recovering from its slump. The bad news is, business inventories remain high and will likely constrain future growth. While Wilson expects there will be manufacturing growth in April, she expects “sluggish but sustained growth in freight” later on.

Meantime, Cass expenditures for freight dropped 1% in March, taking back a portion of the 6.3% increase from the month before and putting the measure at 2.287, down 7% from a year earlier.

“Truck rate changes have been extremely moderate and most shippers are not expecting much of a change in the first half of 2016,” said Wilson.

The reason is capacity in any freight transportation mode isn’t a problem and that’s keeping spot market freight costs down. However, she notes tariff rates on some goods were set to increase in mid-April, and diesel prices are creeping back up, rising 4.6% in last month.

Overall, Wilson said some measures show the economy appears to be in good shape, with strong employment figures for March, plus improvements in hourly wages, housing starts, home sales and exports, with inflation remaining low.

“On the downside, consumer spending has been sluggish, business investment has been weak, unemployment went from 4.9% to 5% in March, new building permits declined in April, the dollar remains robust in world markets, hurting our export prices and, finally, the Federal Reserve is divided on the next course of action [on whether to raise interest rates],” she said. “Global economic conditions are still weak and fragile in some economies, adding a level of uncertainty to the U.S. economy."

According to Wilson, 2016 is turning out to be difficult to predict, but at least “anecdotally, however, many players in the supply chain remain cautiously optimistic for the rest of the year.”

Comments

  1. 1. tracy still [ April 19, 2016 @ 07:21AM ]

    All of your predictions are based on prior month's performances and hold no water to what is really going on in the market. Analyst are like weather forcasters, you can be dead wrong and never loose your job.

 

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