Data declines in November Cass Freight Index Report but is still better than expected

The numbers don’t tell the full story in the November edition of the Cass Freight Index Report from Cass Information Systems. While the report showed mostly showed annual and sequential declines for shipments and expenditures in November, Cass said it came in stronger than expected, especially for shipments.

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.

November freight shipments—at 1.092—were flat compared to October, following a 4.7 percent September to October decline and a 1.7 percent August to September increase. Shipments saw a 5.13 percent decrease compared to November 2014. Shipments cracked the 1.0 mark for the 63rd straight month in November, with Cass pointing out that November marks the first time in five years in which shipments did not head down in November.

But it is not necessarily a cause for celebration, with November’s shipment level at its lowest November level going back to 2011. What’s more, Cass highlighted declines in rail carload and intermodal volumes in November as reported by the Association of American Railroads, with intermodal’s decline reflecting high inventory levels that retailers and wholesalers are dealing with, with carload declines stemming from coal, petroleum products, and metallic ores down, as well as other bulk commodities. Other factors cited by Cass include October truck tonnage up nearly 2 percent, according to the American Trucking Associations, which was led by inventory moving from warehouses and distribution centers to sales outlets in advance of holiday shopping in November.

November expenditures––at 2.409––were off 1.07 percent compared to October and 9.09 percent annually, falling for the fourth time in five months. On a year-to-date basis, Cass said average monthly freight payments are down 4.7 percent compared to the 2014 average, which was attributed to lower shipment volumes that led to looser capacity and lower spot market prices, and moderate contract increase, said Cass.  The report also explained that Black Friday and Cyber Monday sales were strong this year, with customers leveraging reduced prices and discounts before costs headed up for the balance of holiday shopping season.

Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report and contributor to the Cass report, wrote in the report that unemployment, household income, inflation, and consumer spending have stabilized over the last 18 months. And with the Federal Reserve expected to raise rates soon, she wrote it will negatively impact companies with high inventories as it will lead to higher carrying costs in tandem with an inventory-to-sales ratio that has been high throughout 2015, as well as freight levels expected to fall off in December, which has been the typical seasonal pattern.

In last month’s report, Wilson said that excess inventory remains problematic as the pairing of record inventory levels and an expected interest rate increase are likely to lead to increases in inventory carrying costs, she explained, and could lead to a drawdown akin to what occurred in 2009 and 2010, when there was a significant inventory drawdown.

As Wilson said in September at the CSCMP Annual Conference, she expects freight activity to taper off as the year comes to an end, with retailers and wholesalers having ample supply for the holiday season that will not translate into import and freight shipment gains.