March Cass Freight Index Report remains on similar rates and shipments path

March shipments, at 1.197, were up 2% compared to February and down 1% annually, and March expenditures, at 2.889, were up 6.1% annually and up 0.5% compared to February.

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The most recent edition of the Cass Freight Index, which was released earlier this week by Cass Information Systems was mixed to a degree on an annual and sequential basis.

Many freight transportation and logistics 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) index at turning points, which lends to the value of the Cass Freight Index.

March shipments, at 1.197, were up 2% compared to February and down 1% annually. This marks the fourth consecutive month that annual shipments were down after a 0.8% decrease in December, which marked the first annual shipment decline in 24 months, and a 0.3% annual decline in January and February’s 2.1% annual decline. As previously reported, the December and January shipment readings were up against respective all-time highs reached in December 2017 and January 2018, coupled with stabilizing patterns in nearly all underlying freight flows.  

Donald Broughton, the report’s author and principal of Broughton Capital, wrote that the Cass outlook is more cautious today than it has been since it began predicting the recovery of the U.S. industrial economy and the rebirth of the U.S. consumer economy in the third quarter of 2016.

“With March down -1.0% — the fourth YoY negative month in a row — we are preparing to ‘change tack’ in our economic outlook,” he stated. “Yes, all of these still relatively small negative percentages are against extremely tough comparisons; yes, the two-year stacked increase was 10.8% for March; and yes, the Cass Shipments Index has gone negative before without being followed by a negative GDP. But, at a minimum, business plans and economic outlooks should bemoderated or have contingency plans included or expanded.”

Addressing shipments, Broughton observed that there is concern relating to what he called “severe declines” international airfreight volumes, especially in Asia, and lackluster railroad volumes in auto and building materials. But, on a more positive note, he said the 2% sequential gain in shipments was reassuring, as well as solid U.S. domestic trucking volumes, especially in truckload dry van. What’s more, he said that he is closely watching rail volumes of chemicals and other shipments, which have lost momentum in recent weeks, and could offer up the first evidence of the global slowdown coming to the U.S.

And he also observed that data in the coming weeks will indicate whether this is merely a pause in the rate of economic expansion or the beginning of an economic contraction, noting that that if a contraction occurs then the Cass Shipments Index will have been one of the first early indicators.

March expenditures, at 2.889, were up 6.1% annually and up 0.5% compared to February.

Broughton explained that almost all modes of transportation are using the current environment of pricing power to create capacity, which will first dampen and eventually kill pricing power.

And he said that demand is still exceeding capacity in most modes but not to the degree it was for most of 2018.

“Since this is the seasonally weakest part of the year, it is not normally prudent to use current capacity utilization rates to predict a change in pricing trends-except in circumstances such as last year when demand far exceeded capacity, even during the seasonally softer period,” wrote Broughton.

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