A key monthly indicator of U.S. transportation activity that has mirrored the slowdown in U.S. economic growth showed mixed results in August, but is expected to weaken again as the economy and transportation industry enter the fall peak season.
The index, compiled by freight payment and auditing firm Cass Information Systems Inc. based on transportation spending by more than 100 of the largest U.S. shippers, found that shipments increased 1.9 percent over July levels, but that freight expenditures from those companies declined 3.7 percent over the same period, the third straight month of decline. Freight expenditures in August were only 15.8 percent higher than in the same period last year, according to the index. By contrast, expenditures between January and July had gained, on average, 30.9 percent from the year-earlier period.
The Cass index found that rail outperformed other modes, with car loadings up 6.1 percent and intermodal traffic up 5.6 percent over the prior month. Truck capacity shortages continue to be reported, although the problems are not believed to be widespread, according to the index.
The Cass report came one day after the Institute for Supply Management (ISM) announced that its main index of manufacturing activity dropped in August to 50.6 percent from 50.9 percent in July. Any reading under 50 percent indicates contraction, a level the ISM index has not seen for nearly two years. The ISM report also showed that production, new orders, and order backlogs declined, indicating manufacturing and shipping weakness in the weeks and months ahead, according to Rosalyn Wilson, senior analyst at the Vienna, Va.-based Delcan Corp. and author of the Cass index.
As for the effects on pricing, rail rates had been climbing earlier in the year but have since flattened out, while truck rates have fallen by 3.5 percent within the past month, Wilson said. Although spot prices are as strong as they've been during the past three years, contract rates have remained stagnant because many contracts were negotiated when capacity was abundant and shippers held enormous leverage, Wilson said.
With volumes weakening and rates remaining steady, spending on transportation services should continue to decline, Wilson wrote.