Shipment volumes in November 2016 slipped 3 percent from October and 0.5 percent compared with the same 2015 period following the first year-over-year increase in the previous 20 months, according to the latest Cass Freight Index Report.
The North American freight market slipped back into negative territory in November 2016 after stemming a 20-month free fall the previous month, according to the latest Cass Freight Index Report.
Shipment volumes in November slipped 3 percent from the previous month and 0.5 percent compared with the same 2015 period following a 2.7 percent year-over-year increase in October. The October increase, which resulted from what industry analysts called a “more than normal fall surge” in demand, was the first year-over-year growth since March 2015.
“We have seen a wide range of results in the different modes: from continued volume growth in parcel and airfreight driven by e-commerce, to a sequential improvement in truck tonnage, to less bad rail and barge volume overall,” said Donald Broughton, an economist with Avondale Partners and author of the report. “Although it is far too early to make a ‘change in trend’ call, data is beginning to suggest that the consumer is finally starting to spend a little, and that with the recent surge in the price of crude the industrial economy’s rate of deceleration has eased.”
Freight expenditures for the month dropped 1.8 percent compared with October and 4.5 percent from 2015 levels, but Cass noted the rate of contraction was still less than in previous months. Shipping payments contracted 10.1 percent year-over-year in May, 8.8 in June, 5.1 percent in July, and 6.3 percent in August.
The logistics payment solutions provider attributed the improvement primarily to a steady increase in fuel prices over the past six months, as well as “some improvements” in pricing power of trucking and intermodal carriers. Broughton noted that a fundamental rule of marketplaces is that “volume leads growth,” meaning that shipment volumes generally increase in advance of pricing.
“If the winter of the current year-and-a-half freight recession in the U.S. is not over, it is certainly showing increasing signs of thawing,” he said.
November volumes were driven specifically by e-commerce parcel shipments, with FedEx and UPS reporting U.S. domestic volumes up 10 percent and 5.2 percent, respectively, in the latest quarter, according to Broughton.
Airfreight volumes in October (the most recent month for which data is available) also showed improvement, up 10.5 percent in the Asia Pacific and 3.6 percent in the Europe Atlantic trade lane, following respective increases of 7.5 percent and 4.7 percent, according to Avondale’s proprietary air cargo index.
Rail volumes in the last 18 months have contributed to the overall decline in the North American fright market, but have become “increasingly less bad, and in recent weeks have actually turned slightly positive,” said Broughton. According to data from the Association of American Railroads (AAR), U.S. Class I railroad traffic, which has fallen in 89 of the last 95 weeks, grew 0.4 percent for carload and 1.9 percent for intermodal in November.
U.S. rail volumes have suffered from a combination of a strong U.S. dollar and weak domestic industrial production driving fewer exports, and the current currency valuation indicates this trend will continue, he added.
“Bottom line, rails may not serve as a drag to the overall Cass Shipments Index in coming months, but may instead start to be a positive,” said Broughton.
The trucking industry has provided mixed results of late, as tonnage seems to be growing, but loads have contracted in five of the last seven months in 2016, 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.
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.
North American freight market falls back into negative territory
