Truck freight: Reading the latest tea leaves

Judging by some of the most recent intelligence available on domestic freight trends, predicting where truck tonnage will go as 2013 continues to unfold will be a somewhat risky business—at least until the economy shows yet clearer signs of strength.

According to Baird Equity Research, its March report on truck and rail freight trends issued today shows that domestic freight is “firming in March, consistent with seasonality.” The freight analysts who authored the report contended that: “All in,1Q13 volumes appear generally consistent with expectations (above-seasonal January, soft February, seasonal improvement in March) and contacts generally expect 2Q13 demand trends to be stable.”

While Baird described February’s freight truck and rail volumes in total as “soft,” the just released DAT North American Freight Index that measures spot-market freight availability in the U.S. and Canada pictured that month more positively— stating that February “showed a return to post-recession freight volumes, following a record-setting January.”

And the latest release of the American Trucking Assn.’s advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index was also positive-- rising 0.6% in February after increasing 1% in January. ATA stated out that, including last month’s performance, truck tonnage has now increased for four straight months, which the trucking lobby pointed out “hasn’t happened since late 2011.”

Nonetheless, ATA chief economist Bob Costello did sound a cautionary note about the rest of the year. “Fitting with several other key economic indicators, truck tonnage is up earlier than we anticipated this year,” he said. “While I think this is a good sign for the industry and the economy, I’m still concerned that freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns. A little longer term, I think the economy and the industry are poised for a more robust recovery.”

Costello’s tempered outlook is affirmed by the Equipment Leasing and Finance Association’s(ELFA) Monthly Leasing and Finance Index (MLFI-25)released this week.

This index, which reports economic activity from 25 companies representing a cross section of the $725- billion equipment finance sector, showed that their overall new-business volume for February was $4.7 billion— which was down 6% from the volume of $5 billion recorded in February 2012.

What’s more, month-over-month, new-business volume was down 20% from January. Still, on the other hand, the index shows that, year to date, cumulative new-business volume was up 5% compared to 2012.

ELFA also noted that the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI) for March is 58.0, which is a slight decrease from the February index of 58.7. According to ELFA, that change reflects a “leveling off in industry participants’ optimism after two consecutive increases.”

“It is too early to tell whether February’s decline in new-business volume signals a longer-term trend spurred by economic uncertainty, sequestration and unresolved fiscal matters, or is a one-time development that needs to be closely monitored,” said ELFA president & CEO William G. Sutton.

“Recent internal and external economic indicators and analyses point to a moderately sluggish beginning to the year, to be followed by a pickup in overall economic activity in the second half of the year,” he added. “February’s somewhat disappointing data could very well provide concrete evidence of this forecast.”

According to the DAT’s freight index, year-over-year freight availability by equipment type varies. A “surge” in freight for vans and reefers at the end of the month contributed to 7.6% and 7.2% increases, respectively, compared to February 2012. But flatbed freight declined 11%, ”following seasonal norms.”

On a month-over-month basis, DAT’s index also revealed that van loads slipped 11%, reefer volume declined 15%, and flatbed freight availability was unchanged.

The DAT index shows that rates increased 0.8% on the spot market in February for vans compared to January, but declined 6.0% for reefers and 2.0% for flatbeds. As freight volume rose in the lastl days of February, van rates also increased. Compared to February 2012, van rates were up 1.6% and reefer rates jumped 2.9% while flatbed rates fell 7.5%.

DAT noted that these rate results are derived from the DAT RateView, which is based on $18-billion of actual transactions paid by brokers, 3PLs and shippers to carriers, and are linehaul rates only and exclude fuel surcharges.

Baird Equity Research’s report on March freight trends includes specific insights, summarized from the firm’s recent freight-channel checks and other relevant data points. For example, Baird found that “some truckload markets noted to be soft in February (Southern California, Texas, and cities serving East Coast ports) have strengthened in recent weeks. Spot-truck demand has strengthened on a week-by-week basis through March, as reflected in our proprietary Spot Demand Indicator.”

Baird also related that “rising fuel prices and [severe] weather” caused a “modest drag for domestic transports in 1Q13.” The firm noted that diesel fuel prices climbed 6% during the first eight weeks of 1Q-- creating a headwind to truckload carriers. And it pointed out that severe winter weather in the Midwest and on the East Coast “added incremental operating expenses during 1Q13, particularly against very favorable 1Q12 weather comparisons.”