Cass Freight Index report shows sequential gains and annual declines

Mixed messages appeared to be a key theme in the most recent edition of the Cass Freight Index Report from Cass Information Systems.

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.

June freight shipments—at 1.160—picked up where May left off in posting its highest level of the year, topping May by 0.2 percent and down 3.4 percent compared to June 2014. This gain comes at a time when the economy shows signs of “weakening,” according to the report.  June represented the 58th month that shipments topped the 1.0 mark.

But it also marks the fifth straight month that shipments have grown, although the 0.2 percent increase is the smallest gain for the year to date. Cass cited various reasons for the slower pace of shipment growth in June, including: weak manufacturing output over the first half of 2015 (which started to bounce back in June), sluggish first quarter orders related to bad weather and West Coast port labor issues); a strong U.S. dollar in global markets that slowed export growth and manufacturing, too.

While shipment growth did slow, Cass reported in its May report last month that 2014 was the best freight month going back to Great Recession, with the first six months of 2014 very strong, making for difficult annual comparisons that the May report noted “tends to dilute the performance of freight shipments” for the same period in 2015.

Expenditures headed up 2.4 percent in June to 2.599, showing growth for the fifth month in a row, while declining 5.8 percent compared to June 2014. On a year-to-date basis, expenditures are up 5.1 percent, which is not at the same level over the same amount of time as shipments are at 7.6 percent.

Cass said this reflects how rates have not seen substantial growth, with capacity keeping pace with gains in shipment volume, with little significant rate pressure. On the trucking side, the report explained that with capacity utilization slightly below 100 percent, the sector “is still walking a delicate tightrope, but carriers are reporting that they are reluctant to give up a good customer because of rates and are settling for lower rates.”

Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report and contributor to the Cass report, observed in the report that even though the economy is tepid, freight is improving albeit at a slow growth rate.

“As we head into the second half of the year, expect a leveling off or even a drop in July shipment volume,” wrote Wilson. “This is traditionally a slow month. Things will begin to pick up again in August as we head into school and then holiday shopping.”

Wilson also pointed out that exports are expected to continue to be weak, as the dollar’s strength is expected to remain high without action from the Federal Reserve, while import goods will remain attractive for U.S. consumers as a result of the strong dollar and the increased buying power that comes with it. 

Many industry stakeholders are reluctant to make a call on how things shake out in the second half of the year, due to lingering headwinds like sluggish retail sales growth and a high inventory-to-sales ratio. But there are also encouraging developments, too, like low diesel prices and capacity not as tight as it was a year ago at this time.