North American shipment volume jumped up in February, while total freight expenditures reversed a four-month slump, according to the latest Cass Freight Index.
The number of shipments increased 5.5% in February and is 0.9% higher than the same month a year ago.
According to Rosalyn Wilson, supply chain expert, and senior business analyst with the management services firm Parsons, who provides analysis for the report, part of the increase in February was due to winter weather that led to increased shipments of oil and coal. Also, railroads reported increases in grain shipments the last two months.
“The problems caused by labor negotiations on the West Coast have contributed to an economic slowdown for most of the first quarter. The two sides in the contract negotiations have come to terms, but not yet ratified them, which will open the floodgates to moving the backlogged freight. The Port of L.A. estimates that it will take three months to return to normal. Meanwhile, congestion and capacity will be the industry’s buzzwords,” she said.
The report also showed freight expenditures were up 4.3% in February from January after declining for three months, and gained 0.6% over February 2013.
“Widespread rate increases have not yet taken hold and spot rates have been flat or down throughout the month, so the increase in freight expenditures is largely due to the increase in freight shipments,” said Wilson. “Expect rates to rise in March as both rail and truckers deal with the herculean task of transporting the goods from the West Coast.”
She believes the slow start to 2015, in terms of freight spending and shipments should not be viewed as a concern, noting last year the weather caused a disruption similar to the West Coast port problems, but once those were resolved the economy began to heat up.
“The recently settled ILWU contract came after a prolonged nine-month series of slowdowns and port closures, causing a freight gridlock. The conflict will cost retailers as much as $7 billion in increased carrying costs and lost sales,” Wilson said. “Much of the undelivered freight will be discounted immediately upon receipt because it is no longer in season, which will contribute to mounting inventories. New orders and production are still strong, as is consumer confidence, so we should expect this slowdown to be a temporary blip.”
The Cass Freight Index measures trends in North American shipping activity based on $28 billion in paid freight expenses for its customer base of hundreds of large shippers.