Truck tonnage suffered a sharp 3.8% drop in October, according to data tracked by the American Trucking Associations (ATA), and Hurricane Sandy is shouldering much of the blame for that steep decline.
“Clearly Hurricane Sandy negatively impacted October’s tonnage reading,” noted Bob Costello, ATA’s chief economist. “However, it is impossible for us to determine the exact impact. I’d expect some positive impact on truck tonnage as the rebuilding starts in the areas impacted by Sandy, although that boost may only be modest in November and December.”
More troublesome, however, is the steady decline in truck freight volumes over the last three months. According to the ATA’s for-hire truck tonnage index, freight decreased 3.8% in October, 0.4% in September, and 0.9% in August – and Costello thinks that tonnage deceleration is due to falling factory output and declines in consumer spending on tangible-goods.
Peter Nesvold, transportation and equities analyst for Wall Street investment firm Jefferies & Co., added in a research brief that data tracked by his company suggests that “October was the worst month for freight since the financial crisis,” though loads, rather than tonnage, are improving sequentially so far in November albeit at a sluggish pace.
Still, Nesvold stressed that Hurricane Sandy continues to “cloud” diesel fuel consumption data tracked by Jeffries. “The most recent data point on weekly diesel consumption — the week of November 9 — now shows demand down 2% year-over-year, which marks a sharp turnaround from the previous week’s 17.7% year-over-year plunge,” he said.
“But the ‘improvement’ in our diesel tracker likely reflects the drawdown in diesel supplies at refineries, blending plants, pipelines, and bulk terminals as some of these facilities came back on line after being significantly damaged by flooding, power outages, ruptured tanks, etc., during Hurricane Sandy,” Nesvold pointed out. “Thus our diesel tracker will remain a bit muddled in the next few weeks, as the impact of Hurricane Sandy cycles through the data.”
Nesvold added that Cass Information Systems recently noted that, because of the weak economy and high inventories, the normal holiday surge hasn’t yet materialized and that Hurricane Sandy will affect the freight numbers for the East Coast for the rest of the year.
“After the sharp and sudden drop [due to the hurricane], freight volumes will rise quickly in the region as emergency supplies and construction materials are moved in to support reconstruction efforts,” Cass reported.
Noel Perry, senior consultant with FTR Associates, echoed that view in comments earlier this month as he expects the devastation wreaked by Hurricane Sandy should pump up freight levels in the short term for trucking.
Perry estimated that trucking should garner a big share of the roughly $10 billion to $15 billion worth of transportation business as the Northeast begins to rebuild from the “super storm” – and projects storm-related transportation demand to peak in April next year.