A closely watched monthly index of North American shipping activity rose slightly in April over March, but the growth was at a much slower rate than is expected this time of year, according to Cass Information Systems Inc., which audits and pays about $26 billion in freight bills a year.
Cass' shipment index, which measures shipment volumes, rose just 0.7 percent on a sequential basis. The index declined 4.9 percent from the April 2015 results, which reflected an economy and industry in better shape than today.
Meanwhile, freight payments rose 0.2 percent from March, and fell 8.3 percent year-over-year, Cass said. With shipments up 0.7 percent, the lower expenditures number indicates pronounced weakness in freight rates, as ample capacity holds down rates.
The traffic stagnation is a departure from the relatively from the relative strength during the same four-month period for the past five years. Rail carload and intermodal traffic paced the weakness last month, with carloads falling 21.1 percent from March to April, reversing an equally strong rise in the February-March cycle, while intermodal shipments declined 17.8 percent sequentially, after a 19.2-percent gain from February to March.
Cass said the U.S. economy decelerated through April, and that May, usually one of the strongest months of the year, is shaping up to be subpar due to elevated inventory levels among retailers. For example, private data in April showed a pronounced weakness in new orders coming from textile mills, a sign retailers will need to work off inventory or see improved demand before committing to new purchases.
The economy "may get worse before it gets better," which doesn't bode well for activity over the near term, said Rosalyn Wilson, a long-time transport and logistics analyst, and the report's author.
The pace of retail orders is having an impact on truckload pricing. Cass and investment firm Avondale Partners LLC reported yesterday that Cass' "Truckload Linehaul Index" fell 2.3 percent in April after dropping 0.6 percent in March. Besides flat demand, pricing is being impacted by increases in truck-driver pay, which keeps more drivers in their seats and more rigs running; a decline in carrier bankruptcies; and overall fleet growth, Cass and Avondale said.
Avondale stuck to its projection of several months ago that truckload rates in 2016 will move within a range of minus 1 percent to 2 percent, with the risks to that projection on the downside.
Cass' "Intermodal Index" fell 3.4 percent in April after declines of 3.8 percent and 3 percent in February and March, respectively. Intermodal pricing has been hit by the sluggish U.S. economy and continued low truck diesel-fuel prices, which narrows the price gap between cheaper intermodal service and faster, more direct truckload deliveries.
Avondale said it expects intermodal rates to continue falling through 2016.