Shipment volumes grew 7.1 percent in May 2017 compared to the year prior, confirming the first positive indication in October 2016 was a change in trend and not a one-off anomaly, according to the latest Cass Freight Index Report.
The North American freight market showed increasing strength in May 2017, with both shipments and expenditures up for the fifth consecutive month, according to the latest Cass Freight Index Report.
The 7.1 percent year-over-year increase in the May Cass Shipments Index is further confirmation that the first positive indication in October 2016 was a change in trend and not just a one-off anomaly.
Donald Broughton, an economist with Avondale Partners and author of the report, said it appears that the “October Cass Shipments Index, which broke a string of 20 months in negative territory, was one of the first indications that a recovery in freight had begun.”
Despite the downturn in brick-and-mortar retail sales, freight seems to be gaining momentum in other segments. Following a stronger April, May posted a healthy 4.3 percent sequential improvement, according to the index.
Freight expenditures for the month also showed a 7.4 percent year-over-year increase, and while the nominal data for May is lower than the levels seen between 2012 and 2015, Broughton says it “appears poised to reach those levels by the end of the year.”
Specifically, Broughton pointed to e-commerce as a driver of growth.
“Parcel volumes associated with e-commerce continue to show outstanding rates of growth, with both FedEx and UPS reporting strong U.S. domestic volumes,” he said.
May data also shows that airfreight volumes have been improving, with the Asia Pacific lane jumping 12.3 percent and the Europe Atlantic lane growing 4.3 percent on a year-over-year basis, according to Cass.
“The recent surge in Asia Pacific airfreight gives us increasing confidence in the technology segment of the global economy, not because everything that moves in this lane is a semiconductor, but because the largest overall segment/type of good that is moved via airfreight in this lane has one or more semiconductors in it,” said Broughton. “Hence, there historically has been a high level of correlation between Asia Pacific airfreight and semiconductor billings. This is good news for economies in Asia, and good news for the technology segments of the U.S. economy.”
Rail volumes have also seen steady improvement in 2016, with the Association of American Railroads (AAR) reporting that in the last four weeks overall commodity carloads originated by U.S. Class I railroads grew 8.4 percent year-over-year, and even intermodal units have turned positive, up 5.5 percent compared with the same 2016 period.
The improvement suggests that the higher price of crude is driving increased activity in oil and gas exploration as companies with DUCs (drilled uncompleted wells) are choosing to proceed with fracking operations, said Broughton. Furthermore, the reason rail volumes have been so weak in the past may be due to reduced fracking activity as well as “the strength of the U.S. Dollar, which is driving both fewer exports and less domestic manufacturing, as the primary driver.” In the short term, said Broughton, the higher price of oil is stronger than the U.S. dollar.
The trucking industry is one of the more reliable indicators of the domestic economy, and Cass has moved towards focusing more on the number of loads moved by truck rather than the number of tons moved by truck, said Broughton. The index shows that tonnage itself appears to be growing, but the three-month moving average pulled tonnage growth down to -0.86 percent. Dry van truck loads were down 2.24 percent and pulled the three month moving average to -1.87 percent. However, recent data from DAT Solutions suggests June will be more promising.
The bottom line, said Broughton, is that the “trucking industry data released by the ATA was getting better and gaining momentum, but recent tepid results by brick and mortar retailers appear to be taking their toll.”
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 shows increasing strength in May
