Although North American freight shipments continued to climb in May, they are still well below those of the last several years, and expenditures for freight fell for the third time in five months, according to the latest Cass Freight Index Report.

The measure for freight shipments rose 1.3% from the month before to a reading of 1.091. That's its highest level since November, but it’s down 5.8% from May a year ago. The gap from May 2014 is even larger, 7%, when the reading was at 1.173, one of its highest since the Great Recession.

Spending on freight movements didn’t do as well, falling 0.4% in May from April to a reading of 2.282, its lowest reading since January. It's also down 10.1% from May 2015.

There hasn’t been the robust growth in shipments normally expected this time of year, according to Rosalyn Wilson, supply chain industry analyst and founder and president of the consulting practice FreightMatters, who provides analysis for the report.

Both railroad carload and container shipments were down in May from a year ago, while truck tonnage slid for both linehaul and spot markets. Add to this the fact that industrial production improved just slightly while a wider reading of manufacturing production fell for the third straight month in May, and it’s little wonder freight shipments didn’t impress.

“The current economic outlook is volatile, which has led to slow uneven growth," Wilson says. "What is perceived as a strong sign one week often looks like a sign of economic weakness the next."

Even the Federal Reserve is having difficulty pinning down the direction and strength of the economy. At their June 15 meeting, they lowered their economic growth projection from 2.2% to 2%.

According to Wilson, the global economy is facing many unsettling influences, such as Britain’s possible exit from the European Union (aka the Brexit), China’s economic woes and currency problems, and oil prices.

Rates

When it comes to freight expenditures, Wilson says the slow downward trend is completely opposite of the upward trend of previous years.

“The restrained growth in freight shipments, coupled with abundant available capacity, has pushed down rates. In addition, according to DAT Solutions, total carrier revenue has been impacted by a 35% drop [or] 10 cents per mile in the fuel surcharge compared to last May,” she says. “The low demand is giving shippers more bargaining power to drive down rates.”

Wilson says the result is many trucking companies, such as Swift, are adjusting the size of their available fleet by parking trucks.

“In Swift’s case, 300 trucks were removed from its active fleet this spring. Some analysts believe that rates are being driven so low that companies will not reinvest and that shippers should take advantage of this low point to lock in rates,” she says.

Looking ahead

Predicting the second half of 2016 and beyond gets more complicated with each economic report released, according to Wilson.

“On the positive side, average annual wages are rising and with that increased consumer spending. On the negative side, the May jobs report showed only 38,000 jobs were created, and both March and April were revised downward,” she says. “The number of people seeking jobs was relatively flat in recent months, which meant lower unemployment, but the number of disgruntled people leaving the job hunt grew, reducing the labor participation rate.”

Wilson also notes that inventories are still too high, which is a continuing concern, but retail sales have grown steadily but slowly, but with more growth in online sales than from brick and mortar stores. On top of this neither imports nor exports have increased substantially, nor are they expected to.

In other words, Wilson says, “We basically are at a standstill as we wait for the forecasted strengthening.”