Signs of economic improvements are evident but there is a way to go

Regardless of how one comes to a conclusion regarding the state of the economy, specifically, the freight economy, in this case, one thing it seems most everyone can come to some sort of general agreement on is that things appear to be looking up. Now, that is far from breaking news, but it merits attention all the same, considering that watching the economy is indeed a definitive part of what we are all doing on a daily basis. And based on what we have seen lately, things are ostensibly trending in the right economic direction.

By ·

Regardless of how one comes to a conclusion regarding the state of the economy, specifically, the freight economy, in this case, one thing it seems most everyone can come to some sort of general agreement on is that things appear to be looking up.

Now, that is far from breaking news, but it merits attention all the same, considering that watching the economy is indeed a definitive part of what we are all doing on a daily basis. And based on what we have seen lately, things are ostensibly trending in the right economic direction.

Two things that signal what will, or could, be a shift to the more positive (freight) economic side are the most recent editions of the Cass Freight Index Report from Cass Information Systems and the monthly truck tonnage index from the American Trucking Associations (ATA).

In the case of the Cass report, its thesis of a freight recovery having begun in earnest is very telling, not to mention encouraging. But this is not an overnight development at all.

The report, whose most recent data comes from January, noted that freight shipments saw a 2.7 percent annual increase in October 2016. While that uptick is decent enough on the surface, what really drives its significance home is that the October gain represented the first time shipments headed up annually in the previous 20 months.

While November dipped slightly with a 0.3 percent annual decline in shipments, December was strong, up 3.5 percent, leading up to January’s impressive 3.2 percent annual increase.

As covered on this site, 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.

Among the drivers for higher shipments were parcel volumes associated with e-commerce continuing to show outstanding rates of growth, with both FedEx and UPS reporting strong U.S. domestic volumes.

And Broughton also pointed to other things like data indicating consumer spending is heading up, as well as crude oil prices seeing prices rise above more than $50 per barrel, and an easing in the industrial economy’s rate of deceleration.

While the rate of ongoing economic progress is unclear, Broughton said that the one thing that is clear is that the “freight recession, which began in March 2015, appears to be over.”

That is truly an encouraging statement to be sure. And the ATA offered up some additional positive insight of its own, with seasonally-adjusted January truck tonnage up 2.6 percent annually and not seasonally-adjusted tonnage up 3.4 percent annually.

ATA Chief Economist Bob Costello explained that these numbers indicate that the freight economy is starting to show some signs of life, sentiment that appears to match up quite well with what Avondale’s Broughton noted in the Cass report.

And maybe even more importantly, as it relates to the health of the freight economy, is the large drop in the December inventory-to-sales ratio cited by Costello.

“The decrease put inventories throughout the supply chain, relative to sales, to the lowest level in two years,” he said. “There is no doubt that the inventory glut was a drag on truck freight volumes last year.”

Stifel analyst John Larkin also observed in a research note that the inventory glut seems to have waned as a sluggish influence on volumes­­. That is a good thing, but there is a ways to go to match previous lows, while noting that previous lows may now be the wrong target to use given the need for omni-channel and e-commerce retailers to offer rapid order fulfillment options. 

OK, so volume gains and lower inventories are clearly major cogs in a freight recovery, or an emergence from a freight recession. But there are also other clear indicators, too, including things improving retail sales numbers, and strong gains in new orders on the manufacturing side as well.

Other more “mainstream” things helping to push the economic needle forward include: a healthy stock market; gains in factory output; rising consumer confidence, and an improving job market.

Not any one of these things is a panacea for economic gains, but collectively they appear to be working well in tandem, and have been for a little while now. But we need growth for more than just a little while for this to translate from signs of optimism to a full-blown economic rebound. We have been around these parts before, now we just need to see it through to fruition. In any event, these are encouraging signs for the freight economy and otherwise. 


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

· All Topics
Latest Whitepaper
Evaluating Goods-to-Person Technologies
This white paper overviews the various, self-contained, goods-to-person AS/RS systems available for handling the totes, cases and eaches most frequently faced by e-commerce order fulfillment operations, and the typical applications for each.
Download Today!
From the May 2017 MMH Issue
Every company considers itself an innovator. It’s time to include materials handling leaders in that category.
Top 20 Worldwide Materials Handling Systems Suppliers 2017
ERP Suppliers’ Changing Role
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2016 Warehouse/DC Operations Webcast: Confronting omni-channel complexity
During this webcast we’ll examine the current activities, trends, and best practices in warehouse and DC operations management and how companies plan to address complex issues associate with omni-channel fulfillment.
Register Today!
EDITORS' PICKS
Materials Handling Innovation (and why it matters)
Every company considers itself an innovator. It’s time to include materials handling leaders in...
Thrive Market’s Startup Distribution Network
How does a fastgrowing, e-commerce startup company build out order fulfillment capabilities? Thrive...

U.S. Roadmap for Material Handling & Logistics: Version 2.0 released today
On Tuesday, the U.S. Roadmap for Material Handling & Logistics: Version 2.0 will be released on...
2017 Productivity Achievement Awards
Modern’s annual Productivity Achievement Awards honor companies that have made exceptional...