Cass Freight Index Report indicates the freight recession appears to be over

Even with mixed annual and sequential results, the most recent edition of the Cass Freight Index Report from Cass Information Systems is trending towards the positive, when it comes to assessing the current state of the freight transportation market.

Many freight transportation and logistics executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

For January, the most recent month for which data is available, shipments were up 3.2 percent annually at 1.005 and down 6.4 percent compared to December. This follows a 3.5 percent annual gain in December, a 0.3 November decline, and a 2.7 percent gain in October, which marked the first time it headed up in the previous 20 months.

Donald Broughton, the report’s author and transportation analyst for Avondale Partners, wrote that the 3.2 percent gain in January shipments “strongly suggests” that last October’s gain may have marked a change in trend and one of the first indications that a freight recovery had begun in earnest.

As for what drove the gains in shipments, Broughton explained that parcel volumes associated with e-commerce continue to show outstanding rates of growth, with both FedEx and UPS reporting strong U.S. domestic volumes. And he cited the proprietary Avondale Partners index in the most recent month available (December), which showed airfreight has also been showing strong, sequentially improving strength, with the Asia Pacific lane jumping 13.2% and the Europe Atlantic lane growing 5.7%. This was a solid follow-on from November, October and September in which the Asia Pacific lane grew 7.8%, 10.5%, and 7.5% (respectively) and the Europe Atlantic lane grew 3.4%, 3.6%, and 4.7% (respectively). He noted this also highlights that this resurgence began before the election.

January freight expenditures at 2.268 headed up 4.3 percent annually, while declining 0.3 percent compared to December. This is the first time expenditures have been positive in 22 months, with the caveat that it came up against an “easy” January 2016 comparison, which was at its lowest point since 2011, when the economy was slowly coming out of the recession. And in January 2016, the expenditures index reflected crude oil prices at under $30 per barrel, coupled with weak demand.

“Data is suggesting that the consumer is starting to spend a little,” Broughton wrote, “ and that with a surge in the price of crude (back above $50 in October), the industrial economy’s rate of deceleration first eased and then began a modest improvement led by the fracking of DUCs (drilled but uncompleted wells), especially in the fields with a lower marginal production cost (i.e., Permian and Eagle Ford). How fast will the recovery be from here? That is yet to be seen. However, the overall freight recession which began in March 2015 appears to be over.”