Freight Outlook Shows Volume Strong, Pricing Even Stronger

The Cass Freight Shipments and Expenditures Indices are clearly signaling that the U.S. economy, at least for now, is ignoring all of the angst coming out of Washington D.C. about the trade war.

Despite concerns coming out of Wall Street about the increased threat of inflation or the continued increase in interest rates, these indices are displaying accelerating strength on top of increasingly difficult comparisons. Demand is exceeding capacity in most modes of transportation by a significant margin. In turn, pricing power has erupted in those modes to levels that continue to spark overall inflationary concerns in the broader economy. With all of this positive news taken into account, Cass sees signs that the transportation infrastructure has reached its limit, at least in the short-term, to accommodate higher rates of volume growth.

The group does not fear longer-term inflationary pressure given that technology provides multiple ways to increase asset utilization and price discovery in all parts of the economy, especially in transportation.

In fact, signs show that ELDs (Electronic Logging Devices), which initially hurt the capacity/utilization of truckers (especially small truckers) are now beginning to contribute to gains in equipment utilization. This is especially true in the Dry Van and Reefer (temperature control) marketplaces of trucking, while the Flatbed segment of trucking is continuing to struggle with productivity since the adoption of ELDs.

Shipments first turned positive twenty-one months ago, while expenditures turned positive eighteen months ago. The current level of volume and pricing growth is signaling that the U.S. economy is growing, but that level of growth may have reached its short-term expansion limit.

Shipments Index is yet another data point confirming that the strength in the U.S. economy continues, albeit at a lower than the extraordinary 10.0%+ pace established in the January through May period. We are confident that the increased spending on equipment, technology, and people will result in increased capacity in most transportation modes. That said, many modes are reporting limited amounts of capacity or even no capacity at any price shippers are willing to pay.