As is often true of a change in trend, it is neither smooth nor linear. The October Cass Freight Shipments Index was up 2.7%, breaking a string of 20 months in negative territory, then November fell back into negative territory, albeit ever so slightly (down 0.5%). Now December—coming in up 3.5%—suggests that the October data was not a false positive but instead the beginning of a more positive trend. 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. 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. If the winter of the overall freight recession we’ve been in for more than a year and a half in the U.S. is not yet over, it is certainly showing promising signs of thawing.
The sequential month pattern looked a bit more ominous, but doesn’t give us great cause for concern. There is some degree of normal seasonality at work, and we are continuing to get daily reports of stronger shipment volume in almost all modes from both hard data sources and industry anecdotes. It also looks far less troubling when compared to the seasonality in 2013, 2014 and 2015.
Although still in negative territory, the Cass Freight Expenditures Index also gives us some hope. Expenditures (or
the total amount spent on freight) were still down (-3.0% on a YoY basis), but as was true in October and November,
this was less than the rates of contraction in May, June, July and August; down 10.1%, 8.8%, 5.1% and 6.3%
respectively. We see this increase as a result of the steady increase in the price of fuel over the last six months (and
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the recent rise in the price of crude should only add to this positive bias), but we are also seeing some improvements
in the pricing power of truckers and intermodal shippers. As an example, the proprietary Cass Truckload Linehaul
Index (which does not include fuel) only fell 0.9% on a YoY basis in the month of November, which was far less than
the 3.5% decline it posted in September. The proprietary Cass Intermodal Price Index (which does include fuel) faired
even better, increasing 1.5% in December, marking the third YoY increase after 21 consecutive months of decline.
We should also remind readers of a fundamental rule of marketplaces: volume leads growth. Repeatedly, we have
watched, in a host of different markets, that volume goes up before pricing starts to improve and volume goes down
before pricing starts to weaken. Even in markets as basic as the weather, the number of hours of sunshine (start to
decline) drops long before the temperature starts to fall.
> Click here to access the entire Cass Freight Index Report – December 2016.