Truck Tonnage Plummets

The American Trucking Associations’ advanced seasonally adjusted for-hire Truck Tonnage Index plunged 3.6 percent in November after falling 1.9 percent in October.

Its no surprise that Transports have been so weak; This is also consistent with a ho-hum holiday shopping season.

Tonnage122706

From the ATA:

“On a seasonally adjusted basis, the tonnage index fell to 106.8 (2000=100) from 110.8 in October, which is the lowest level since late 2003. The index decreased 8.8 percent compared with a year earlier, marking the largest year-over-year decrease since December 2000. Year-to-date, the truck tonnage index was down 2.8 percent, compared with the same period in 2005. The not seasonally adjusted index decreased 9.5 percent from October to 106.5. . .

November 2006 marked the single worst month for for-hire truck tonnage since the last recession,” said ATA Chief Economist Bob Costello. “Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.”

Goldilocks My Arse!

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Source:
ATA Truck Tonnage Index Plummeted 3.6 percent in November
American Trucking Associations
Wednesday, Dec. 27, 2006
http://tinyurl.com/yzuynr

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Discussions found on the web:
  1. winjr commented on Dec 28

    CNBC this morning really didn’t have an answer for ATA’s report. Later, Leisman was talking with their guest host who commented, in response to the recent soft regional Fed manufacturing surveys, that “manufacturing really doesn’t matter anymore”.

  2. dave commented on Dec 28

    I understood that as fuel prices rose, some shippers were moving from truck to rail. To get a full comparison, you would need to aggregate truck, rail, and air freight. Lets also not forget that last fall saw a lot of tonnage moved for hurricane repairs.

  3. lurker commented on Dec 28

    Moldy Lox! Not Goldilocks.

  4. BDG123 commented on Dec 28

    The rail argument is a fallacy. That is the same argument Cramer is using and we all about his bloviating tendencies. The dynamics of the trucking industry are not affected by rails. There is a cost advantage with energy being so expensive that developed late in 2003 BUT that does not mean rails are used in lieu of trucks. It means truckers are loading their trailers on rails for long haul transport and picking up the loads with tractors for final delivery. In other words, truckers have always been clients of the rails and it simply accelerated with the fuel costs.

    Truckers move the economy.

  5. dave commented on Dec 28

    Also I just read that internet shopping was up 25% from last Christmas season, while store retail was up around 2%, I think. Internet shopping means that products are moved to consumers by UPS, USPS, etc. from central warehouses, reducing the shipping tonnage required to distribute to individual retail stores. Just playing Devils advocate here. What I really think is that the housing crash has vastly reduced shipping of construction materials and home improvement materials.

  6. BDG123 commented on Dec 28

    Btw, an anecdotal comment. A childhood friend whom I saw on Xmas vacation is an independent trucker contracted under a major. He worked exclusively on GM contracts for long haul freight. His contract was just terminated in December. Big rig and trailer and no income or prospects.

    I’ve said it once and I’ll say it one hundred times, As GM goes, so goes the economy. People view the auto industry as less relevant today and they couldn’t be more wrong. The big three directly or indirectly employ tens of millions of Americans. There is another boot to drop early next year and the auto supply chain employment picture is going to likely get alot worse.

  7. Mike M commented on Dec 28

    Auto recession, Housing recession, weak transports, inverted yield curve. Let’s buy some stocks, baby!!

  8. Teddy commented on Dec 28

    Did Hank and Ben talk to the Chinese about whether they will still love us if we drop our short term rates to restart the ATM house machine which we now use as a proxy for MANUFACTURING? Maybe they will send us autos to replace the jobs we lose and buy our debt via the carry trade, sorta like tough love.

  9. Norman commented on Dec 28

    With new home sales down and thus much less heavy material being supplied what the heck did you expect? Of course trucking traffic is down.

  10. Michael C. commented on Dec 28

    Well, Chicago PMI, consumer confidence, and even existing home sales all intially came in above expectations even if slightly so.

    Surely, if one of those were drastically negative, it would be mentioned here.

  11. ac commented on Dec 28

    The Chicago PMI was weak. I ignored the headline, which is understandable. Consumer Confidence is something I watch when I believe the economy is in a recession. Because you usually don’t see it drop much till then.

  12. Fred commented on Dec 28

    How do you recession bears explain the 2/10 treasury spreads narrowing?

    Recession odds have now dropped to 33% according to a Fed Reserve study.

  13. ac commented on Dec 28

    Or it could mean the economy is nearing recession as they decline before a recession begins. The 10 year may be on the verge of a major correction, which would most likely put the nail in it.

  14. Bill Conerly commented on Dec 28

    “Its no surprise that Transports have been so weak; This is also consistent with a ho-hum holiday shopping season.”

    Weak trucking activity is consistent with weak sales EXPECTATIONS by retailers. They truck in what they expect to sale. Surprisingly low sales don’t reduce truck traffic, they simply increase markdowns.

  15. winjr commented on Dec 28

    “Or it could mean the economy is nearing recession as they decline before a recession begins. The 10 year may be on the verge of a major correction, which would most likely put the nail in it.”

    Good point, AC. I seem to remember reading somewhere that spreads typically do not tighten as a recession actually begins, but instead widen, especially the spread between Treasuries and commercial paper. I believe that this is a signal that John Hussman looks for.

  16. david foster commented on Dec 28

    I’d like to know exactly how the Truck Tonnage Index is calculated. It sounds like it doesn’t have a mileage component: ie, 20 tons hauled across town counts as much as 20 tons hauled across the country.

    If the index does have a mileage component (ie, ton-miles), then any shift to rail would effect the index, since relatively short hauls at both ends would replace moves of a thousand miles or so. If, on the other hand, it is simply “tons”, then a move to rail for the intermediate segment would actually *increase* the index, since two truck moves would replace one. (At least for FTL freight.)

  17. ac commented on Dec 28

    Thanks winjr. The spread did go over 50% late in the fall, like it did in 2000 though the higher FFR caused it to go up to 70% then. We shall see I guess.

    I am concerned the collapse in MBA this month. That just isn’t seasonally adjusted, that is quite the fall in a couple of weeks, showing crashing demand. If it continues into January setting lows not seen in years, housing’s decline will pick up again. Almost like water torture. Some times it speeds down, then recovers slightly, speeds down again ete ete. A dramatic drop in residential investment in the next 2 quarters could bring a slight contraction, especially if the yields are going to rise back over 5.00, forcing rates higher on a already weakened market causing further investment declines. If the consumer follows in the summer, we may have found ourselves in a deep contraction by fall damaging the entire international system………or something inbetween.

  18. Don commented on Dec 28

    From the publicly available sample truck tonnage perort on the ATA website: “The Monthly Truck Tonnage Index is based on a survey of the total tons of intercity freight transported by motor carriers. This includes both large and small truckload carriers, along with less-than- truckload carriers. ”

    I don’t know that it includes intermodal. Intermodal doesn’t look THAT promising though http://railfax.transmatch.com/#IndTable
    Note the Quarter to Date numbers compared to ’05.

    I have heard anecdotally there was a late surge in LTL (less than truckload, i.e. “small” time definite shipments) but given the length of today’s supply lines I doubt that counted for too much.

  19. JuanBobsDad commented on Dec 28

    Why is this a surprise with new home starts grinding down and why do you think it reflects on the economy outside of construction/homebuilding? The tonnage for a $1M furnished house is about the same as for $3Billion of iPods. Come on Barry, you can (and usually do) better than this.

  20. j.r. commented on Dec 29

    For what its worth a friend of mine who is prez. of a small trucking co….about 1200 trucks(privately held), that are strictly flatbeds told me business is on par with 2001…which is not good. Another individual I know who is a terminal mgr. for a publicly traded trucking company that pull vans confirmed that their business is slow…this was on Sunday.

  21. guambat stew commented on Dec 29

    Re: “Internet shopping means that products are moved to consumers by UPS, USPS, etc.” (by dave)

    This from Daniel Gross: “December 21, 2006
    ABSOLUTELY, POSITIVELY OVERNIGHT

    A strange data point embedded in the Federal Express earnings release.

    The express business accounts for the lion’s share of Fed Ex’s revenues. The U.S. business is the heart of the express operation. And in the quarter that ended November 30, 2006, the U.S. express operation moved fewer packages than it did in the quarter that ended on November 30, 2005.

    U.S. domestic revenue per package increased 3%, driven by a higher rate per pound, while package volume declined 1%.

    This seems to continue a trend. In the quarter that ended at the end of August 2006, package volume fell 2 percent from the quarter that ended in August 2005.”

  22. Eclectic commented on Dec 29

    “Building permits down another 3% after falling 5% in the previous month; as low as they were in 1997.”
    (credit Roubini’s blog)

    Who is the most important decision maker regarding a newly issued building permit?

    The builder, right?… and he’s about to order a number of appliances (I don’t know… what?, maybe $5-10 Gs worth?), just as he inks the permit, that have to be manufactured, sold, boxed, shipped and installed… and at least half that routine occurs prior to laying the slab.

    However these items specifically tied to that particular permit are independent of those having already been shipped and installed in houses already built or being completed that simply haven’t closed yet.

    That is… those appliances in houses not sold yet are in a special sort of inventory that has been removed from the manufacturer’s inventory. It is technically sold, yet un-sold in that special way.

    Consequently, my guess is that permits are a tell for the snapshot condition of non-defense/non-trans durable goods and shipping tonnage related to housing, but that the condition would not be revealed in the normal course of new housing sales… until those sales fail, and thus the inventory (although sold) enlarges the inventory of wholesalers and manufacturers.

    Imagine the factory shipping finished appliances. There would be a trail of outbound inventory that would at first not reflect a slack housing market because they would be shipped for installation in houses that are not sold. Finally, there would be a slowing of outbound inventory (and shipping tonnage) that would reflect a slowing of permits. I know there may be quite a delay from permit to scratching ground, but the permit is really the green flag for planning the the availability of resources for the completion.

    Consequently, there would come the time that a doubling of the housing slowdown’s effects would be experienced by the manufacturers, because of two related but quite different causes of slowing appliance sales.

    I’m sure this would extrapolate into many other items related to construction, from paint and roofing material to brick, concrete and the shipping tonnage related to these items as well.

  23. HerbieS commented on Dec 29

    what this all means is another booming stock market. the fed sees slowdown, lowers rates, pumps liquidity, and presto, market goes up and pulls the economy with it. happy days are here again…I love that song.

  24. Robert Rubealcaba commented on Jan 2

    I am a partner in a small trucking co. hauling mainly construction equipment in the Dallas, Tx. local & regional area. We were blindsided by the quick drop off in activity in late 2000 and all of 2001. By early 2002 we were “rightsizing” our small fleet to match our new revenue numbers. We ended up with 8 trucks and that is the number that we have today. After this episode I vowed to never be blindsided again and have been educating myself to become a “amateur” economist. My point in all of this background info is so that you know where I’m coming from when I say that the current conditions, especially since Labor Day, are exactly like what started in late 2000 and early 2001. A few of the things that are exactly identical include the following that happened in that time period including:
    – Abrupt slowing of construction related deliveries, especially housing developments.
    – Ten fold increase of owner operator calls to us (we are leased to a major carrier-Great Wide) at first looking, then pestering, then hounding, and finally begging us for some freight. (exact same scenario in late 2000/early 2001)
    – A sudden surge starting in November and currently still accelerating of repo pick ups. (no real repo activity since 2003)
    – Truck salesman calling us that we haven’t heard from since 2001-2002. (they usually don’t even waste their time with us small fry)
    – Customers now suddenly scrutinizing every freight bill.
    – My not answering my phone if it is not a number I do not recognize so I don’t waste time listening to the owner operators telling me their tales of woe.

    The list goes on a little more but you get the idea. Business had started recovering in 2003 slowly, 2004 and 2005 were great, we couldn’t keep up. 2006 had started slowly downshifting until after Labor Day when the dive started. Luckily this time we are ready and prepared; just mailed last equipment payment in early December! No debt, great balance sheet and money in the bank. The total opposite of what we were in 2001. Talking to my other contacts across the country it is the same almost everywhere regardless of the type of freight hauled whether flatbed, van etc.
    I only regret what is ahead for so many who I know jumped in the business in the last couple of years thinking the good times would last forever. We were lucky and made great sacrifices and had outside resources to pull from to survive last time but I know many will not for this current downturn just starting. And that is one persons report from the trucking frontlines.

  25. Trucking Software commented on Dec 16

    Its a booming industry and trucking is really going up. what i see is that more use of technology and implimenting more and more software in trucking will devleop it. I found Masslogics a great trucking software for my company. You can get it here http://www.masslogics.com

    It really solves probelms

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