Shipments and expenditures surged again in April, according to data released by Cass Information Systems (NASDAQ: CASS) on Wednesday.
The Cass Freight Index returned a 27.6% year-over-year increase in shipments with the expenditures component of the index jumping 45.1%. The comparisons to the prior year reflect widespread quarantine mandates that brought the economy to a temporary halt.
The year-over-year growth rate for shipments was a new record, outpacing the rate of recovery seen following the 2008-09 recession.
Shipments fell 3.1% from March on a seasonally adjusted basis as expenditures increased 1.1%. March numbers reflected a freight snapback following February’s severe winter storms, which caused widespread transportation outages and delays.
The shipments index was only slightly below pre-pandemic levels, off 1.3% when compared to April 2019.
The report’s author, ACT Research’s Tim Denoyer, believes supply issues weighed on April’s sequential change as well.
“While some of the March m/m increase was makeup from activity lost during the polar vortex in February, our sense is the April m/m decline was due more to ongoing supply constraints and the deepening semiconductor shortage, which resulted in considerable downtime in auto and truck manufacturing in April,” Denoyer wrote.
He pointed to a roughly 20% decline in automotive carloads hauled by the railroads from March to April as a tell. Denoyer doesn’t expect a quick fix either.
“Near-term supply chain risks remain, with constrained chip supply unlikely to be fully resolved quickly as lead times on new semiconductor manufacturing capacity are generally about 18-24 months,” Denoyer said.
The sequential improvement in the expenditures index, even as shipments declined, indicates higher transportation rates were the catalyst. The implied rate increase for the month was 3.4% sequentially, up 13.7% year-over-year.
“With much of the annual contract freight market repriced at this point, we expect these increases to begin to slow near-term. However, with strong freight demand and supply constraints on both drivers and trucks, spot and contract rates should continue to rise,” Denoyer continued.
Cass’ truckload linehaul index reached a new record, climbing 13% year-over-year and 2.4% above March on a seasonally adjusted basis.
The tightness in the TL market continues. Carriers are currently rejecting one in every four loads tendered under contract terms. A 25% tender rejection rate was first reached in August with little letup since as capacity concerns, both drivers and equipment, linger.
On the horizon
Looking forward, Denoyer said the shipments index will increase 27% year-over-year for the second quarter if normal seasonal patterns hold. Growth is expected to slow to roughly 10% year-over-year in the third quarter.
Assuming traditional seasonal trends, he believes the expenditures index will see a 50% growth rate in May and June, up 30% during the third quarter.
“With tailwinds from a very strong retail economy, a backlog of container ships still anchored in the San Pedro Bay and inventories recovering but still tight, 2021 is setting up to be an extraordinarily strong year of recovery across the U.S. freight network,” Denoyer concluded.
Data used in the Cass indexes is derived from freight bills paid by Cass, a provider of payment management solutions. Cass processes $28 billion in freight payables on behalf of more than 8,000 subscribers annually.
