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Steady-but-soft US freight demand points to slow growth ahead
By William B . Cassidy
On a year-overyear basis , shipment volumes were negative for the 14th consecutive month , falling 3.6 % in March . Shutterstock . com
Signs that the US freight economy is improving are mounting , but gains in freight demand are being absorbed and their impact softened by a capacity glut on US highways .
The consensus is that a stronger catalyst is needed to boost freight demand , and potentially , freight rates . That catalyst could be lower interest rates , stronger manufacturing , a boost in home construction and auto sales — or a combination of all of them .
The Freight Transportation Services ( FTS ) Index , for example , rose 3.1 % in February from January as transportation companies recovered from a frigid January and freight market indicators improved , the US Bureau of Transportation Statistics ( BTS ) said April 10 .
Total US freight spending by shippers dropped 18 % year over year in March and is expected to fall 9 % in 2024 as US shipping volumes and transportation rates rebalance , according to the Cass Freight Index , released April 15 . On a year-over-year basis , shipment volumes were negative for the 14th consecutive month , falling 3.6 % in March , the lowest rate of annualized declines since April 2023 .
“ Even if rates begin moving higher ... freight will very likely remain deflationary this year .”
The rebound by the FTS index , a measure of freight shipments moved by US for-hire transportation companies , and continued decline in the Cass index are the latest signs that US freight sectors , especially trucking and intermodal rail , are recovering from a two-year slump in demand . Both indexes should allay concern among some shippers about a potential pricing turning point in 2024 .
The seasonally adjusted FTS index — which covers tons and ton-miles moved by all transportation modes , including trucking , rail , water , air freight and pipeline — had fallen 3.1 % in January , following the end of the holiday season and amid bitter winter weather across much of the US . The FTS index was down 1.1 % year over year in February .
The immediate bounce back in demand once the weather improved signaled underlying resilience and the influence of other positive indicators , BTS said in a statement . A better US manufacturing outlook is one indicator .
The Federal Reserve Board Industrial Production Index grew 0.1 % in February from the previous month , reflecting increases of 2.2 % in mining and 0.9 % in manufacturing . Other indicators point to rising manufacturing output in the first quarter of 2024 .
The S & P Global US Manufacturing Purchasing Managers ’ Index ( PMI ) has been above 50 for three consecutive months , although it dropped from 52.2 in February to 51.9 in March . Any reading over 50 indicates expansion . The Institute of Supply Management PMI rose to 50.3 in March .
The PMI improvements are reflected in shipping gains reported by US railroads .
“ The recent announcement by the Institute for Supply Management that its manufacturing sentiment index turned positive in March aligns with rail carloads , excluding coal , showing a healthy 2.9 % growth ,” Rand Ghayad , chief economist at the Association of American Railroads ( AAR ), said in a statement .
Carload volumes of chemicals and petroleum , both direct inputs that contribute to US manufacturing output , are rising , according to AAR .
Demand ‘ broadly consistent ’
Rising US imports haven ’ t had much discernable impact on trucking volumes yet . And although US manufacturing is expanding , according to Purchasing Managers ’ Indexes from S & P Global and the Institute for Supply Management , new orders reported in recent months may not have made it from the factory to the road .
FTR Transportation Intelligence and Truckstop . com data for the week ending April 12 showed total truckload spot market volumes were up 10 % year over year but still 24 % below the five-year average .
The US long-distance truckload producer price index ( PPI ) was essentially flat in March , rising only to 175.8 from 175.6 in February . The measure of all-inclusive truckload
34 Journal of Commerce | May 6 , 2024 www . joc . com