Despite continued weather problems, North American shipment volume and freight spending both soared in February 2014.
The new edition of the Cass Freight Index shows number of shipments, in particular, followed the pattern from the past several years by reversing the January decline. Freight expenditures, reversed a two-month decline, but showed the weakest January to February rise since 2010.
February shipments increased 7.3% from the month before, but fell 0.4% from the same time a year earlier. Expenditures increased 6.8% from January, while it gained 6.4% from the same time in 2013.
Expenditures have grown at a faster rate than shipment volume, and the economy has yet to feel the rate increases that should be coming later this year when capacity tightens and carriers take back the reigns for rate control, according to the report.
“February freight volumes showed a strong recovery from the weak start to 2014 that January delivered, right in line the predictions of many who expect the economy to gain momentum and shipping volumes to gain strength,” said Rosalyn Wilson, supply chain expert and senior business analyst with the management consulting firm Delcan Corporation, who provides analysis for the report.
She said there are still some strong headwinds to overcome in the freight sector, the most obvious being the nearly imperceptible growth in volumes.
“The global marketplace remains weak, so our exports are lagging expectations. While unemployment continues to fall, the number of new jobs created each month is not enough to sustain the economy,” Wilson said.
Also, she belives as the Federal Reserve reduces its bond purchases, interest rates will continue to rise, which will have repercussions in the freight sector.
“The inventory levels that are currently higher than our previous crisis level, when carrying costs were minimal, will become more burdensome and probably lead to a drawdown similar to that during the recession,” she said.
Wilson noted that trucking capacity is “at exactly the right level for the volume of freight we have today, but will quickly be inadequate later this year if the predictions of a robust 2014 materialize”.
She said obtaining credit to purchase new vehicles will become tighter, probably squeezing out smaller and marginal trucking companies that don’t have the capital to expand or modernize their fleets.
The Cass Freight Index represents monthly levels of shipment activity, in terms of volume of shipments and expenditures for freight shipments. It is based upon the domestic freight shipments of hundreds of Cass clients whose freight payables are processed by the company.