Freight shipments declined slightly in May as the economy displayed more signs of slowdown, according to the Cass Freight Index for the month. Freight spending was almost unchanged as well, posting a meager 1.7 percent increase over the previous month.


The first quarter GDP growth rate was not as high as predicted, with preliminary estimates
remaining at 1.8 percent. Consumer spending was revised downward, and inventories upward, the report said. Originally robust estimates for second quarter GDP have been cut to between 2.5 and 3 percent in response to weak growth and decline.

The current economic picture is not indicative of a strong recovery, and many sectors of the economy have remained fragile, Cass said unemployment is on the rise again, reaching 9.1 percent, while hiring has fallen off.

The manufacturing sector has been responsible for much of the growth in new jobs this year, but in May it cut 5,000 jobs. The public sector continues to shed jobs as its budgets are reduced.

Housing prices are falling again, further reducing personal wealth. At the same time, prices are up sharply for food and fuel. This recovery is not typical of previous recoveries in the U.S., Cass noted. The economy has not quickly returned to previous growth levels and the present weakness suggests that we will not see that kind of growth for the remainder of this year.

Freight Shipment Volumes

Another drop in durable goods shipments and orders has flattened freight volumes, which posted a month-to‐month 0.2 percent drop. Year‐over‐year growth rates are dropping swiftly as well, with May freight volumes only 9.6 percent higher than a year ago, compared to April which was 12.3 percent higher than a year ago.

Truck shipments continued to fall off in May, after declining 7 percent in April. The rail industry reported steady gains in the last half of the month, but weekly carloading levels are well below what they were earlier this year. Fuel prices rose for most of the month, but posted their sharpest decline in over a year during the last week of May.

Although many industry observers are still predicting a strengthening as we head to the second half of the year, Cass contends tht the underlying pieces are not falling into place to support anything more than weak growth. Retail sales rose in May, but were well below what had been forecast for May and lower than April's numbers.

The Consumer Confidence Index dropped in May from 66.0 to 60.8, reflecting consumers' uncertainty and rising pessimism about inflation, their income prospects, and the housing market. This uncertainty is translating into a slowdown in purchasing. Business spending and manufacturing are declining as well. New orders and production declined in May, 10.7 and 9.8 percent respectively.

The Purchasing Managers Index recorded its steepest drop since 1984, plunging 6.9 percent in May. Imports and exports are also forecast to be flat or even a little down in May. All of this translates to reduced freight volumes in the next few months.

Freight Spending

Freight expenditures inched up 1.7 percent in May from April levels. The gap is narrowing for payment increases in year‐over‐year comparisons ‐ up 29.9 percent over last year in May, lower than the 34.9 percent jump in April. Fuel surcharges continue to be the major source of increased costs as fuel prices continued to soar in May.

The increase in retail sales was primarily at fuel outlets and discount stores. Inventories are building slowly and retailers are using pricing to bring them more into line. The volume slowdown, coupled with the fuel surcharges, slowed down any real rate growth that we experienced earlier in the month, Cass said.

The economy is in a stall, Cass said -- what remains to be seen is the extent.

To receive the Cass Freight Index report on a monthly basis, send an email to CassFreightIndex@cassinfo.com.