In a reversal of a very long trend, the month-to-month change in freight movements in February was greater than that of expenditures, reports the February 2012 Cass Freight Index Report.


Costs to move goods seem to have flattened out for now. Compared to January, freight shipment volume was 2.5% higher in February, while freight spending was 1.2% higher. Annually, freight volumes were up 3.5% from January 2011.

The manufacturing sector continues to be the backbone of the economy. The Commerce Department report on Manufacturers' Shipments, Inventories and Orders showed that shipments of manufactured durable goods were up 0.4% in January for the third consecutive month. Petroleum and coal products accounted for much of the 1.3% in nondurable goods shipments, which were up 3.5%. Railroad weekly carloadings and intermodal traffic have trended downward in recent weeks after an uneven start to the year.

Truck tonnage has been edging up, but not on a consistent basis. Retail sales have been moderate, but retail stock is at high-enough levels that significant new orders are not likely. In fact, January new orders for manufactured durable goods declined 3.7%, and new orders for nondurable goods rose 1.3%. The inventories-to-shipments ratio was 1.33, unchanged from the previous month

Monthly freight spending from January rose only 1.2% against the 2.5 increase in volumes. Year-over-year freight expenditures were 9.8% higher than in 2011, a difference that strongly contrasts January's gap of 22.1%. This gap in year-to-year freight spending has been slowly eroding since early last year, but has stayed ahead of the gap in year-to-year shipments.

Flatter rates indicate a sluggish economy and adequate capacity. Fuel costs have risen, but total spending does not seem to reflect this increase. The conclusion would be that carriers have eased up on base rates to compensate for higher fuel charges, according to Cass.

Cass analysts say there are no clear signs that we can expect a fast turnaround for the freight industry; but rather several signs that this year may be more reflective of the uneven growth the U.S. has experienced for the past three years.

The economy is continuing on its slow path to recovery. There have been many positive signs in recent months. Hiring is up, unemployment has edged down, consumer confidence is continuing its five-month upward march, and retail sales (excluding autos) rose another 0.7%. However, consumers are still spending the biggest share of their paychecks on necessities, as prices for food and gas remain high.

Further, consumers have been turning to credit, fueling a 10% growth in consumer debt from November to January and reaching the highest level in 10 years. Despite figures that seem to indicate that the economy is off to a stronger start than last year, GDP growth is still expected to be below 3%.