A closely watched monthly index of North American shipping activity remained basically flat in July over June's levels, underscoring the continued weak state of continental shipping.
The index, released yesterday by freight audit and payment firm Cass Information Systems Inc., found that sequential shipment volumes remained unchanged, while "transactions," or payments, dropped by 0.6 percent. On a year-over-year basis, shipment and transaction activity has declined for 17 straight months, the report said.
Payments dropped 5.1 percent year over year, reflecting a continued capacity glut in most modes that has given shippers leverage over pricing. Declines in diesel-fuel surcharges, which mirror the prolonged drop in fuel prices, have also been a factor in reducing the pricing realized by shippers.
The report said that all levels of the supply chain continue to grapple with elevated inventory levels that act to suppress the flow of new orders and, by extension, the need for shipping services. According to the Cass report, inventories have contracted from U.S. Gross Domestic Product for five consecutive quarters, resulting in an aggregate 3-percent hit to GDP. This is the longest nonrecessionary stretch since 1957, according to the report.
The report forecast that, barring a broad economic downturn, inventory levels should be pared down somewhat during the second half of the year, lessening what has become a "persistent drag" of destocking activity.
With the exception of the parcel industry and expedited transport modes supporting e-commerce activity, contract rates continue to decline, and the report sees no near-term change in direction for either contract or spot—noncontract—pricing.
Given the growing importance of e-commerce shipments, which are generally lightweight items, the index focused attention on the number of loads moved by truck, rather than the amount of tonnage. Though truck tonnage appears to be growing, truckloads have fallen on a year-over-year basis in three of the first six months of 2016, according to the index. The uneven load activity doesn't bode particularly well for the near-term outlook for shipment or pricing growth, according to the report.