Summary
The American Trucking Associations' seasonally adjusted for-hire truck tonnage index jumped 2.1 percent in August. That was the same year-over-year increase that July's index showed. But compared with August 2008 levels, truck tonnage was still 7.5 percent lower. Experts say it's the sign of a steady, if unspectacular, recovery in truck demand.
Analysis
This is going to be a U-shaped recovery, not the hoped-for V-shaped jet job.
That's the message from the latest truck tonnage index reported by the American Trucking Associations. Its August seasonally adjusted index rose 2.1 percent in August, the same increase reported when July 2009 numbers were released.
It may not be much, but in fact this is the best reading since February of 2009.
This is certainly good news for the top-flight truckload carriers such as J.B. Hunt, Werner Enterprises, Schneider National, U.XS. Xpress and Swift Transportation, among others.
In the LTL sector, the rate discounting is ever fiercer as competitors sense a weakness in YRC Worldwide's long-term ability to survive. As such, companies such as FedEx and UPS are going all out in their heavy freight divisions to win over YRC converts. Traditional LTL giants Con-way, Estes Express, Old Dominion Freight Line and New England Motor Freight, among others, are surely but slowly eroding YRC's market share in the growing regional freight environment.
ATA Chief Economist Bob Costello, who oversees the month ATA truck tonnage index, says he's optimistic the worst of the trucking downturn is over. Still, he is warning against any rapid surge in freight demand. Rather, shippers and manufacturers are replenishing inventory on an as-needed basis, cautiously putting their toes in the waters of the economic recovery.
"Most economic indicators, including industrial output and household spending, suggest freight tonnage will exhibit moderate, and probably inconsistent, growth in the months ahead," Costello predicts.
That means the fourth quarter is unlikely to produce the cumulative 4.3 percent gain that the truck index has registered in the past two months. Truckers I speak with say they would be satisfied with perhaps that much increase, as long as it were part of a long, prolonged economic recovery in 2010 and beyond.
John Schulz consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
