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Truck tonnage in October increased compared with year-ago levels but declined on a month-to-month basis, a sign that the freight market is reacting to economic and consumer trends, American Trucking Associations said.
The ATA For-Hire Truck Tonnage Index rose 2.8% annually to 116.3 in October but slid 2.3% from a reading of 119.1 in September, the group said.
“For-hire truck tonnage saw the largest single monthly decrease in October since the start of the pandemic,” ATA Chief Economist Bob Costello said in a Nov. 22 news release. “The decrease fits with the anecdotal reports of a muted fall freight season. It also coincides with a slowing economy. Housing is a weak spot in freight, in addition to a slowing in personal consumption of goods. While factory related freight is holding up better than other areas, it is also decelerating.”
Year-to-date through October, tonnage was up 3.9% compared with the same period in 2021. In calculating the index, 100 represents 2015. The index is dominated by contract freight, as opposed to spot market freight, ATA said.
Another indication of a slowing freight market came from the monthly Logistics Managers Index, which saw its October number fall to 57.5, compared with 72.6 in the same month a year ago. Despite the decline, the LMI still is in positive territory, as any figure above 50 indicates growth while a number below 50 indicates a decline. Month-to-month, the index also was down from September’s 61.4 reading.
Despite the slowdowns, U.S. consumers are expected to increase spending 6% to 8% during the peak holiday shopping season, according to the National Retail Federation’s annual holiday shopping outlook, released earlier this month.
A record 166.3 million shoppers are expected during Thanksgiving weekend–almost 8 million more people than last year. Check out NRF’s latest holiday data: https://t.co/sFMAIH7cig pic.twitter.com/KIUgM32dJe
— National Retail Federation (@NRFnews) November 17, 2022
The current forecast is down from the record 14% increase shoppers tallied last year.
While this year’s spending forecast indicates a relatively strong economy, economists note that the growth range is effectively equal to the rate of inflation, which is running at more than 7% annually.
“The logistics industry continues to struggle to find its way through somewhat confusing economic conditions,” said Dale Rogers, a professor at Arizona State University and one of the LMI authors. “Online sales are expected to increase by 2.5% year-over-year in Q4 — a far cry from the explosive growth of the last two holidays — dampening expectations somewhat through the rest of the year and making it unclear whether or not firms will be able to wind down the inventories sitting in their warehouses, and if demand for transportation will pick up or continue its slide.”
Rogers noted the supply chain remains clogged with inventory that is slowly making its ways to retailers, and that the freight rail network continues to have difficulty moving much of that cargo.
“The rail backups at Chicago switching yards are so bad that [rail carrier] BNSF has begun placing wood over some tracks so idle containers can be stored on top of them,” he said. “Union Pacific continues its practice of capping the number of shipments it will accept as logistics firms sort through the pile of idle and empty boxes, to free up the chassis and the space needed to move goods away from the ports and towards consumers.”
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Rogers added, “The glut of inventory is a leading factor behind the slowdown in transportation all the way through supply chains.”
Researchers at Arizona State, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada-Reno, in conjunction with the Council of Supply Chain Management Professionals, issue the LMI report. The index is a combination of eight unique components that make up the logistics industry, including inventory levels and costs, warehousing capacity, utilization, prices and transportation capacity.
Meanwhile, the October Cass Freight Index increased by 2.9% year-over-year compared with 2021. “We would still describe the freight market as soft, with much of the recent strength on a year-over-year basis more statistical noise than a signal, as evidenced by the 5% year-over-year decline in shipments that will take place in December if normal seasonality plays out from here,” said the report’s author, Tim Denoyer with ACT Research. “The supply-demand balance in U.S. trucking markets has loosened significantly this year, and as a result freight rates are leveling off and set to soften further in the months to come.”
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