Truck tonnage down in February as shippers continue to look towards other modes

The American Trucking Associations (ATA) reported that truck tonnage declined 2.6% in February from January’s levels, marking the largest seasonally adjusted decline in nearly two years. Despite the sizeable decline, tonnage in the economy is still 5.7% higher than at this point last year.

Truck tonnage is often seen as a bellwether for overall activity in the goods side of the economy, as much of the goods that get produced or imported in the US at some point get transported via truck to their various destinations. In that sense, the weak results in truck tonnage fall in line with some of the other indications that suggest the economy has lost some steam during the 1st quarter. As is the case with the broader economy, truck tonnage is still experiencing healthy year over-year growth and should remain solid throughout the course of the year.

The ATA’s Chief Economist Bob Costello echoed these sentiments, saying, ”Despite a softer February than January, freight remains robust as exhibited in the year-over-year increase. The drivers of truck freight – personal consumption, factory output and construction – are good, plus the inventory cycle is in favor of motor carriers, so I expect freight tonnage to grow at a decent pace in the months ahead.”

Intermodal traffic remain strong

Softer economic conditions likely only explain part of the decline in tonnage during the month, however. The trucking industry continues to deal with capacity issues, leading to delays in shipping. In addition, prices for truck transportation have surged in recent months, and rising transportation costs have put increased pressure on shippers to reevaluate their strategy.

Evidence would suggest that shippers have begun to shift some of their freight towards other modes of transportation in response to the recent challenges within trucking. With trucking facing delays and getting more expensive, intermodal becomes a more realistic option for some freight movements. Data from the American Association of Railroads has shown robust growth in intermodal traffic since the start of the year, with year-over-year growth accelerating throughout February. Results from March show continued strength in the intermodal space, with growth nearing 10% during the first half of the month.

As a result, overall freight performance looks solid in the economy even as truck tonnage slipped in February. The Cass Freight Index, which measures freight through various modes of transportation, reinforced this notion and showed healthy growth during February. What remains to be seen is whether or not this is will turn into a longer term trend in transportation. As more shipments get diverted away from trucking, prices in these other modes will rise as well, and how shippers react will be a trend to monitor going forward.