Freight Slows Down in October

Freight shipments slowed in Octover, following the trend observed in the last four years.

According to Cass Information Systems, both total spend and the number of shipments for North American freight declined in October. The indexes have been below 2013 levels for the last several months.

Cats pointed to a third quarter GDP that was a disappointing 1.5 percent annual growth rate, compared to 3.9 percent in the second quarter. The group noted: “Consumer sector goods are, by far, the strongest in the market now. In many ways this is the silver lining in the storm clouds, because it means that consumers are still in the game. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew 3.2 percent in the third quarter after expanding at a 3.6 percent pace in the second quarter.”

The number of freight shipments dropped 4.7 percent from September. The freight shipments index now sits at its lowest October level since 2011. This month’s decline was much sharper than in recent years and can be directly correlated to falling imports and exports as well as decreased domestic manufacturing levels.

Burdened by bloated inventories, and under the shadow of a possible interest rate increase by the Federal Reserve, businesses cut back on new orders placed in the last three or four months. This is resulting in lower import volumes, less freight to move and faltering industrial production. With the dollar still strengthening, export growth decelerated in the third quarter.

Freight payments plummeted 8.7 percent in October—the third drop in the last four months (correlating with changes in shipment volumes). While some of this month’s decrease comes with the drop in shipments, spot rates have also impacted October’s results. At this point in time there is abundant capacity in the trucking sector, which has depressed spot rates. Trucking companies are reporting that new contracts are yielding only 2-3 percent rate increases going into 2016. Dedicated carriage contracts are faring slightly better for the carriers, with an average of a 3-4 percent rise in rates. Carriers are still reporting that they are unwilling to lose a good customer over a few percentage points.

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