Cass: North American freight market free fall continues in September

Shipment volumes in September 2016 slipped 0.4 percent from the previous month and 3.1 percent compared with the same 2015 period, the 19th straight month of year-over-year volume declines, according to the latest Cass Freight Index Report.

   The North American freight market free fall continued in September 2016 despite “less bad” data coming out of August, according to the latest Cass Freight Index Report.
   Shipment volumes in August were up 0.4 percent from July and “only” down 1.1 percent from the previous year, engendering what Cass referred to as mere “false hope.”
   In September, shipment volumes slipped 0.4 percent from the previous month and 3.1 percent compared with the same 2015 period, marking the 19th straight month of year-over-year volume declines.
   Freight expenditures, on the other hand, jumped 5.2 percent compared with August, but were still down 3.8 percent compared with September of last year.
   The logistics payment solutions provider attributed the persistent weakness in the market primarily to “increased levels of volatility as all levels of the supply chain (manufacturing, wholesale and retail) continue to try and work down inventory levels.” This weakness has been offset, in part, by growth in specific areas such as e-commerce and transportation modes serving the auto and housing/construction industries.
   “Bottom line, the Industrial Recession in the U.S. that began in March of 2015 continues to weigh on overall volumes,” said Donald Broughton, an economist with Avondale Partners and author of the report.
   The decline in September shipments was driven primarily by North American rail volumes, which continue to decline as demand for coal and crude oil continue to fall dramatically, and the low price of diesel fuel drives domestic intermodal loads back to the trucking market. According to data from the Association of American Railroads, intermodal traffic for U.S. Class I railroads fell 4.5 percent year-over-year in September, while commodity carloads fell 3.5 percent during the same period.
   “Rails have seen persistent weakness, with overall volumes being negative 86 out of the last 87 weeks,” said Broughton. He said the primary diver of weakness in rail volumes is the strength of the U.S. dollar, which is putting downward pressure on exports and domestic manufacturing, adding that the current valuation of the dollar “would suggest continued weakness in rail volumes.”
   The trucking industry has provided mixed results of late, as tonnage seems to be growing, but loads have contracted in four of the last six months, according to the report.
   “No matter how it is measured, the data coming out of the trucking industry has been both volatile and uninspiring,” said Broughton.
   Although the September decline in shipment expenditures was less severe than in previous months, the market is still contracting, driven by excess of capacity in trucking, rail, airfreight, barge, ocean container and bulk transport.
   And despite the fact that the gap between spot pricing and contract pricing in most modes has closed slightly, “this is more a function of slight declines in contract pricing than it is a function of improvements in spot pricing,” said Broughton.
   “We see little reason to predict a change in course or material strength in either the contract or spot rates for most modes,” he added. “Exceptions to this do remain in the parcel marketplace and forms of expedited transit supporting e-commerce.”
   The Cass Freight Index is based on domestic freight shipments of hundreds of the company’s clients across a wide variety of industries. Cass Information Systems processes more than $26 billion in annual freight payables.