US Freight Tonnage Drops Despite Strong Demand

US truck freight tonnage dropped in May, but not through lack of demand. Instead, a lack of capacity and supply chain disruption were the most likely culprits contributing to an 0.2 percent unadjusted drop in the American Trucking Associations (ATA) For-Hire Truck Tonnage Index in May from April. Seasonally adjusted, tonnage dropped 0.7 percent month to month, the ATA said in a statement Wednesday.

The decline in the ATA index is the latest indication that freight volumes have slipped, even as trucking rates continue to rise. The DAT Freight & Analytics Truckload Volume Index for May fell 6 percent from April and is off 9 percent from its peak in March, although it remained 38 percent higher than a year ago, according the truckload spot market load board operator and market analysis provider.

Consumers have not turned tail, however. Although May data is not available, US consumers spent 0.5 percent more in April than a year earlier, after a 4.7 percent year-over-year increase in March grounded in US government stimulus checks, according to US Bureau of Economic Analysis data.

The sequential monthly decline in volume has not arrested spot and contract truckload rates, either. The DAT monthly average contract linehaul rate, excluding fuel surcharges, was up 9.3 percent in May from January. DAT’s average spot line haul rate was up 11.3 percent over the same period. From April, the DAT spot average was up 3.5 percent, while its contract linehaul equivalent rose 1.7 percent.

The drop in tonnage and spot-market volumes is about supply, rather than demand, and the drop reflects similar trends elsewhere in the economy — at US factories, for example.

Supply-chain disruption rooted in the COVID-19 pandemic and the subsequent breakdown of freight-shipping norms led to higher equipment dwell times in May, as shippers and consignees held onto trailers longer, DAT noted in a statement. That meant carriers did not have equipment to dispatch for the next customer, and that led some trucking firms to increase penalties imposed on shippers.

Then there is the truck driver problem. “The ability to find qualified drivers has been a significant drag on the industry, although it isn’t the only reason for the May dip in tonnage,” Bob Costello, ATA chief economist, said in an e-mail Wednesday. “Many carriers have been shrinking their tractor counts, due to the inability to find qualified drivers, which impacts their ability to haul significantly more freight.”

Despite those headwinds, the overall trend for tonnage is positive, Costello said, as the US economy continues to expand at a rapid pace. parent company IHS Markit expects US real gross domestic product (GDP) to rise 7 to 9 percent in the second quarter. The Federal Reserve Bank of Atlanta’s June 16 GDP Now forecast for the quarters is for 10.3 percent growth.

The summer months, post-July 4 holiday, are typically slack times for truck freight, but the summer of 2021 is shaping up to be an exception. June is typically one of the biggest freight months of the year for trucking, with spring retail and produce seasons at their peak or peaking. Couple that with strong manufacturing demand and high levels of US imports and supply chains are likely to remain strapped.

“Expect volumes to make a big comeback this summer as restaurants reopen and regulations around social gatherings are relaxed,” DAT said in a statement.

Fuel shipments may help increase freight tonnage, as well, as summer travel increases gasoline demand, ATA’s Costello said. “I’m also expecting retail freight to remain robust as inventories are at historic lows,” he added.

Source: Journal of Commerce