North American freight market growth remains slow, uneven

Shipment volumes in May 2016 grew 1.3 percent compared with the previous month, but expenditures slipped 0.4 percent, and both remained well below 2015 levels, according to the latest Cass Freight Index Report.    North American shipment volumes in May 2016 grew 1.3 percent compared with the previous month, but expenditures slipped 0.4 percent from April, according to the latest Cass Freight Index Report.
   Despite the slight growth in shipments, both volumes and payments remained well below the levels seen in the last several years, said Cass. Shipments and expenditures for the month were still down 5.8 percent and 10.1 percent, respectively, compared with May 2015.
   The logistics payment solutions provider said the “slow uneven growth” currently taking place in the North American freight market is a symptom of global economic volatility.
   “What is perceived as a strong sign one week often looks like a sign of economic weakness the next,” said Cass. “Even the Federal Reserve is having difficulty pinning down the direction and strength of the economy. At their June 15 meeting, they lowered their economic growth projection from 2.2 percent to 2.0 percent.
   “The global economy is facing many unsettling influences, such as Britain’s possible exit from the EU, China’s economic woes and currency problems, and oil prices,” it added.
   Cass noted the May shipment figures represent the high point so far in 2016, but still fell short of seasonal expectations. Railroad carload and intermodal shipments grew 1.9 percent and 2.1 percent, respectively, compared with April, but were still down 10.3 percent and 3.3 percent from the same month in 2015, according to the Association of American Railroads (AAR).
   The “slow downward trend” in freight payments in May “is completely opposite of the upward trend of previous years,” the company said, adding that the lack of growth, along with abundant capacity available across modes, is holding rates down.
   According to trucking load board DAT Solutions, total carrier revenues in May 2016 have been impacted by a 35 percent drop (10 cents per mile) in fuel surcharges compared to last year.
   Depressed demand is giving shippers more bargaining power to drive down rates, and as a result, some trucking companies are parking trucks to bring down available capacity. Cass said Swift Trucking is among the operators engaging in this practice, removing as many as 300 trucks from its active fleet this spring.
   “Some analysts believe that rates are being driven so low that companies will not reinvest and that shippers should take advantage of this low point to lock in rates,” the firm added.
   Looking forward to the remainder of 2016, predictions become “more complicated with each economic report released,” said Cass.
   “On the positive side, average annual wages are rising and with that increased consumer spending. On the negative side, the May jobs report showed only 38,000 jobs were created, and both March and April were revised downward.
   “Inventories are still too high, which is a continuing concern. Retail sales have grown steadily but slowly, but with more growth in online sales than from brick and mortar stores. Neither imports nor exports have increased substantially, nor are they expected to.
   “We basically are at a standstill as we wait for the forecasted strengthening,” the firm said.
   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.