U.S. Truck Tonnage Isn't Driving the Economy Out of This Recession

More transport data worth watching in regards to signals for the US economy, although falling tonnage can be viewed as good news since it's likely partly caused by the US consumer starting to make slightly smarter spending decisions. Still, a sharply falling statistic like this is worth noting if you are trying to gauge where the US consumer is going.

The American Trucking Association's advance seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 2.4 percent in June. In May, SA tonnage jumped 3.2 percent. June’s decrease, which lowered the SA index to 99.8 (2000=100), wasn’t large enough to completely offset the robust gain in the previous month..

Compared with June 2008, tonnage fell 13.6 percent, which surpassed May’s 11 percent year-over-year drop. June’s contraction was the largest year-over-year decrease of the current cycle, exceeding the 13.2 percent drop in April.

ATA Chief Economist Bob Costello said truck tonnage is likely to be choppy in the months ahead. “While I am hopeful that the worst is behind us, I just don’t see anything on the economic horizon that suggests freight tonnage is about to rise significantly or consistently,” Costello said. “The consumer is still facing too many headwinds, including employment losses, tight credit, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.” He also noted that inventories, relative to sales, are still too high in much of the supply chain, especially in the manufacturing and wholesale industries. “As a result, this is likely to be the first time in memory that truck tonnage doesn’t lead the macro economy out of a recession. Today, many new product orders can be fulfilled with current inventories, not new production, thus suppressing truck tonnage.”

Trucking serves as a barometer of the U.S. economy, representing nearly 69 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.2 billion tons of freight in 2008. Motor carriers collected $660.3 billion, or 83.1 percent of total revenue earned by all transport modes. Some interesting comments from Costello. Maybe the cliff diving is over, but the sideways motion is "choppy". Not exactly little green shoots.

Comments

[Dave Wrixon:]

Smoke and Mirrors weigh less than you think!

Jul 28 02:58 PM

[ETF STER:]

Transportation tonnage will only increase if there are more products being shipped. Transportation does not drive the economy, it is only an indicator as to the growth...or lack of growth in the economy.

The transportation index is a precursor to an increase in economic activity, (ex) ocean freight will rise before domestic transportation will rise. It is a leading economic indicator of the direction of the general economy.

Until the transportation index rise is confirmed, there will be little growth in the overall economy.

Jul 29 09:34 AM

[Vincent Fer...:]

Yes ETF STER the point of this article is that it is an indicator. But I wouldn't be so quick to say transport doesn't drive the economy as well. What do you think has opened up the opportunities for people to trade and for product prices to fall over the last few decades? I recommend reading a book i think called The Box, about the development of container shipping and how it massively reduced long distance transport costs, thus stimulating massive amounts of trade.

Jul 29 12:30 PM

[Snitzer:]

There was a lot of money spent on bigger container ships focusing on lower per slot costs, the Panama Canal was widened and East coast ports were dredged deeper and infrastructure added anticipating more freight volume on the China/America run. This freight has yet to materialize, and may not ever.
Talked to a guy the other day, an owner/operator trucker operating out of the Charleston ports, and he said it's like a ghost town in there, no lines, no delays, in and out, a far cry from just a year or so ago.
Yes, there is a large domestic freight market in the USA, but without the imports its going to be a long slow roll to nowhere, unless we (USA) begin supporting our own manufacturing base again.
How do we do that? Well, maybe someone will write a book, as that's what it will take to answer that question.

Jul 30 01:28 PM