Truck Freight Demand Surges at Fastest Rate Since November 2013

By Brian Baskin, The Wall Street Journal, August 18, 2015
Trucks lined up
Trucking activity rose to its second-highest level on record in July, as a strengthening economy increased the amount of freight on the road.
The amount of cargo hauled by U.S. truckers rose 2.8% in the latest reading of the American Trucking Associations’ monthly index. It was the biggest monthly gain since November 2013, the industry group said. The index is based off of surveys of the group’s members.
The ATA pointed to improved retail sales, factory output and housing starts, all of which raised demand for freight transportation. The relatively robust domestic economy has shielded U.S. truckers from headwinds that have rattled other carriers, including sluggish growth in Europe and China’s unexpected devaluation of the yuan.
Some large trucking companies, including  Werner Enterprises Inc.  and J.B. Hunt Transportation Services Inc., say strong freight demand should allow them to raise rates later this year.
Carriers have had an up and down year since the ATA’s index hit a record high in January. The U.S. economy has moved in fits and starts, leading to inconsistent demand for hauling freight. In July a key manufacturing reading fell to a three-month low and the Cass Freight Index, which tracks all types of cargo shipments, dipped 1.6% from June.
The ATA sounded a note of caution, warning that high levels of inventories could hurt freight volumes in the next few months. The inventory-to-sales ratio for all businesses has reached its highest this year since the 2008-2009 recession, according to U.S. Census Bureau figures.
“If you have a little more inventory on hand than you need, chances are you’re going to work some of that off, and when you do that … you don’t need as much trucked in,” said  Bob Costello, chief economist at the ATA.
Still, any downturn is likely to be short-lived, Mr. Costello said. Trucking is entering its busy season in the run-up to the start of the school year and the holidays.
In one promising sign for the industry, Home Depot Inc. and Wal-Mart Stores Inc. reported strong sales in the most recent quarter in separate releases on Tuesday, although Wal-Mart’s profits were hurt in part by investment in online sales fulfillment. Home Depot showed the impact of an improving U.S. housing market, reporting 4.2% sales growth in the second quarter in stores open more than one year.
The two companies act as bellwethers for the home construction and retail sectors, respectively, two of the biggest drivers of trucking demand.
 

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