Shippers Spent Less on Moving Freight in January -Cass
U.S. shipping volumes and spending both dipped last month, as the freight market remained weak.
Trucks transporting containers wait in line at the Port of Los Angeles. PHOTO:BLOOMBERG NEWS
Spending by U.S. shippers fell to a two-year low in January, reflecting plunging fuel costs and a sluggish freight market, according to a survey by Cass Information Systems Inc.
Cass’ monthly freight index report showed shipping expenditures falling to 1.4% from a year earlier, while volume in the same period was down 0.2%, extending declines to a fourth month.
The freight market is typically slower in January. But the numbers illustrate how shippers continue to hold back on spending because of elevated inventory levels, even as lower fuel prices make it cheaper to move goods.
Trucking companies have reported lower profits and many have seen their share prices plunge as shippers have cut back. However, executives with two large carriers said they were anticipating a rebound.
It “feels like there’s still a bit of inventory burn going on,” with retailers holding back on replenishment after overstocking last year,Derek Leathers, president and chief operating officer of Werner Enterprises Inc., said at the BB&T Transportation Services conference this week. But declining gasoline prices eventually will stimulate the retail market, he said.
Freight demand isn’t “robust right now, but certainly it’s not nearly as dismal as some of the commentary,” Mr. Leathers said.
Richard Stocking, president and chief operating officer of Swift Transportation Co. said at the same conference that consumer spending will be central to economic growth and shipping demand in coming months.
“We feel good about some of those things that are affecting the consumers,” Mr. Stocking said. “That’s solid job growth, the slight wage improvement, as well as a drop in gasoline prices all helped the consumer.” Swift’s retail-industry customers, he said, “are all pretty bullish about what’s going on.”
Railroads, on the other hand, took the biggest hit from the falling energy prices, according to Cass. Carloads were down 20.6% and intermodal loadings fell 11.9%, as shipments of coal, one of the companies’ primary commodities, and petroleum, saw dramatic declines.
The January Cass report said there are other signs that freight levels will rebound, including a slight improvement in U.S. manufacturing production in January, “a sign that manufacturing may be reawakening.”
Although factory employment has been hit hard by weak exports, job hires were up 29,000 in January,” the report said. “If manufacturing continues to grow—and it should—freight levels will return.”
