Cass: North American freight market ‘persistently weak’

Shipment volumes in August 2016 were relatively flat from the previous month, but expenditures slid 3.3 percent, while both were well below 2015 levels, according to the latest Cass Freight Index Report.    The North American freight market remained “persistently weak” in August 2016 despite rebounding slightly from the previous month, according to the latest Cass Freight Index Report.
   Shipment volumes for the month were flat compared with July, inching up just 0.4 percent, but expenditures slipped 3.3 percent and both still remained well below 2015 levels.
   Cass noted shipments and expenditures fell 1.1 percent and 6.3 percent, respectively, compared with August 2015, the 18th straight month of year-over-year declines.
   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.
   The increase in August volumes was tempered by North American rail volumes, which continue to decline as demand for coal and crude oil continue to fall dramatically. According to data from the Association of American Railroads, intermodal traffic for U.S. Class I railroads fell 5.3 percent year-over-year in August, while commodity carloads fell 6.7 percent during the same period.
   “Rails have seen persistent weakness, with overall volumes being negative 82 out of the last 83 weeks,” said Donald Broughton, an economist and author of the report.
   He noted that the trucking industry provided mixed results for the month, as tonnage continued to show “slightly positive” growth, while volumes continued to be “slightly negative.”
   “No matter how it is measured, the data coming out of the trucking industry has been both volatile and uninspiring,” he said.
   Broughton said Cass continues to attribute the overall weakness in the North American freight market primarily to excess capacity across the majority of transportation modes (trucking, rail, air freight, barge, ocean container and bulk), along with the ongoing decline in diesel and jet fuel prices and corresponding fuel surcharges that influence pricing.
   “Although at first blush, it appears that in most modes the gap between spot pricing and contract pricing appears to be closing slightly, this is more a function of slight declines in contract pricing than it is a function of improvements in spot pricing,” he added. “We see little reason to predict a change in course or material strength in either the contract or spot rates for most modes. 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.