August shipment volume increased 2.3 percent, reversing some of last month’s 3.9 percent slide. August shipments are 4.9 percent higher than a year ago and are up 13.9 percent in 2014. The Institute for Supply Management’s August PMI rose 3.3 percent to 59, the highest level since March 2011’s 59.1, indicating that domestic manufacturing is continuing to gain strength. Driving this PMI increase were new orders, increasing by 5.2 percent, and order backlog which climbed 5.1 percent. Also, 14 out of 16 product categories tracked by the PMI registered a growth in new orders. Inventories have been contracting, but are now showing signs of rising again.
At the same time, the Association of America Railroads reported that average weekly U.S. rail volume, in terms of carloads plus intermodal containers and trailers, was higher in August 2014 than in any month since October 2007. Likewise, the American Trucking Associations reported that July tonnage was up, and their seasonally adjusted Truck Tonnage Index was just 0.6 percent lower than the all-time high in November 2013.
The August freight expenditures index dipped 0.3 percent as rates remain stubbornly flat. While capacity was not as tight as expected – and even spot rates weakened a bit during the month – August 2014 expenditures are 8.0 percent higher than the corresponding month a year ago and 10.8 percent higher than December 2013. A further increase in freight activity in September as holiday goods begin to flow into to the country will strain capacity. So far, however, that has not been a good indicator of higher expenditures, except on the spot rate markets.
As expected, the freight transportation market picked up again in August. Both imports and exports are trending upward, and new orders are growing in China and Europe. U.S. consumer sentiment continues to climb, signaling a developing belief that the economy will continue to strengthen. Consumer spending has inched up as the unemployment rate has fallen. The recent decline in job creation may be a temporary blip in the data since many industry segments, including construction and manufacturing, are gaining steam again after the seasonal lull from mid-June through July. Economic indicators still show hope that the fourth quarter of 2014 may not experience the dramatic drop-off that has come to characterize the economy’s performance since the recession.
The Cass Freight Index represents monthly levels of shipment activity, in terms of volume of shipments and expenditures for freight shipments. Cass Information Systems processes more than $22bn in annual freight payables on behalf of its clients. The Cass Freight Index is based upon the domestic freight shipments of hundreds of Cass clients representing a broad spectrum of industries. The index uses January 1990 as its base month. Analysis is provided by Rosalyn Wilson, senior business analyst with Parsons.
