Bumpy freight road of Cass Freight Index Report in October
Typically viewed as a month in which freight really gets rolling ahead of the holiday shopping rush, October did not show its usual anecdotal evidence of better things ahead, according to the most recent edition of the Cass Freight Index report.
The Cass Freight Index accurately measures trends in North American shipping activity based on $20 billion in paid freight expenses of roughly 350 of America’s largest shippers, according to Cass officials.
As LM has reported, many trucking industry 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.
Freight shipments—at 1.116—were off 3.5 percent compared to September and were down 2.0 percent compared to October 2012. Even with the decline, shipments have remained above the 1.0 mark for 39 consecutive months since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008.
The report pointed out that the lower shipment level is “reflective of the weakening state of the overall economy,” with shipment volume already below corresponding 2012 volumes in six months of 2013.
“The sharp reduction in the shipment volume in October can be linked to the government shutdown,” wrote Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, in her analysis of the report.
Wilson said that while Customs and Homeland Security workers were exempt from the shutdown-related furlough, many freight shipments were delayed because other government agencies were not open to perform necessary inspections or processing.
Freight expenditures—at 2.508—were up 0.8 percent annually and down 2.6 percent compared to September.
This marked the largest sequential decline of the year, with expenditures only trending down in two other months in 2013 as well. Wilson wrote that the decrease in expenditures mirrors the drop in shipments and mainly reflects a change in volume, rather than a substantial change in rates. What’s more, she explained that carriers have found rate increases difficult to sustain throughout the year and October was no exception, with spot market rates falling as the month moved on along with a drop off in posted loads.
Since the government shutdown ended, though, there appears to be a semblance of normalcy from a macro perspective in that market conditions appear to be somewhat steadier albeit in a low-growth environment with balanced capacity.
Looking at fourth quarter growth, Wilson said that “underwhelming” retail sales have resulted in lower expectation for the holiday season, with the National Retail Federation forecasting that the average holiday shopper will spend less 2.5 percent less this year than in 2012 which is the first forecasted decline since 2008.
“[T]he fourth quarter is unlikely to be as strong as initially forecast, with much of the damage already done by the government shutdown and its ripple effects,” wrote Wilson. “A pickup in exports will not be strong enough to offset the expected declines elsewhere in the economy. Ongoing concern, both domestically and abroad, over the lack of a long-term resolution to the federal government’s budget and debt ceiling issues is casting a cloud of uncertainty over economic growth for the remainder of this year and the first quarter of 2014.”