Freight tonnage improved in May, ATA reports

Freight tonnage improved in May, ATA reports

The American Trucking Associations for-hire truck tonnage index posted a 2.7% gain in May, offsetting a 1.7% drop recorded for April.

Compared with May last year, tonnage is up 5.7% and year-to-date tonnage is up 4%, noted Bob Costello, ATA’s chief economist, in a statement.

“Following two consecutive decreases totaling 6%, May was a nice increase in truck tonnage,” he added. “Better consumer spending in April and May certainly helped, but economic growth remains mixed and I’d expect the recent choppy pattern in tonnage to continue for the next quarter or two.”

Costello highlighted what he dubbed “good news” on the inventory front, with the total business inventory-to-sales ratio declining for the first time in nearly a year.

He noted in a recent sit-down with John Larkin, managing director and head of transportation capital markets research at Stifel Financial Corp., that the inventory/sales ratio has gotten to the point (>1.40) where it is constricting freight growth, as inventory levels are above where they should be.

However, he stressed that levels experienced between 2005 and 2007 as well as between 2011 and 2013 – roughly 1.25 to 1.30 – were too low, with those “too low” levels causing significant strain on supply chains. Adding to that, with the rise of e-commerce, stock-out costs are increasing, thus compelling retailers to increase safety stock levels and thereby leading to more inventory in more places.

Yet Costello also pointed out that more “normal” freight flows are likely again when inventory levels reach 1.35 versus 1.30 or 1.25, and thus their recent decline is “good news” for trucking.

“While one month doesn’t make a trend, this was good news for the trucking industry,” Costello emphasized.

TAGS: News
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