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Home » Cass freight index slips in July
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Cass freight index slips in July

August 4, 2011
Mark B. Solomon
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A key monthly indicator of U.S. transportation activity weakened considerably in July, reflecting the sluggishness of the U.S. economy and signaling continued stagnation for the balance of 2011.

The index, compiled by freight payment and auditing firm Cass Information Systems Inc., found that shipments from more than 100 of the largest U.S. shippers declined 3.7 percent over June levels. Freight expenditures from those businesses declined sequentially by 2.1 percent last month as lower volumes muted spending on transport services, the Cass index said. The report measures approximately $17 billion in annual transport spending by these shippers.

Despite the lower volumes, trucking companies are reporting having to turn down loads due to a lack of capacity, according to the Cass report. Load boards—where shippers normally go to post loads for tender—are full as shippers, and even some carriers, have turned to posting loads that need to move, the report found.

"Unfortunately, the reason for this situation is not a burgeoning freight market, but rather the capacity constraints, for both trucks and drivers, that the industry is experiencing," said Rosalyn Wilson, senior analyst for Vienna, Va.-based Delcan Corp. and author of the Cass report. Wilson also produces the annual "State of Logistics" report prepared in conjunction with the Council of Supply Chain Management Professionals.

Wilson said trucking companies are reporting an acute shortage of drivers, even though they have rigs available.

Perhaps more troubling is the decline in rail carload and intermodal traffic in July from June levels. Intermodal, in particular, has shown steady gains through the recession and subsequent recovery, so the decline in July bears watching, Wilson said.

Despite the decline in July, freight expenditures are up 29.5 percent from year-earlier levels, according to the Cass report. The year-on-year increase is due to tightening capacity conditions that have supported spikes in spot rates, the report said.

Wilson said rising fuel, labor, and insurance costs for carriers have offset the impact of rate increases, the most recent of which were announced in July by several less-than-truckload carriers. Increased costs have made it hard for carriers to make headway in raising profit margins, she said. "The tightening of capacity is creating opportunities to raise rates, but it is unclear if this will be sustainable if volumes continue to dwindle," she added.

Wilson said the U.S. economy is in a vicious cycle where businesses won't hire and invest until they see clear evidence of stronger consumer spending, while consumers won't spend while unemployment remains elevated and job prospects are cloudy. The recent congressional fight over raising the nation's debt ceiling did nothing to instill confidence in consumers, while the agreement itself is not a positive for the economy because it failed to achieve the needed spending reductions, she said.

Transportation
KEYWORDS Cass Information Systems
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Marksolomon
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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