The Cass Transportation Index for June was released on Friday, and it’s nothing to write home about. Freight levels and rates haven’t caught up to pre-pandemic levels yet, let alone last year’s levels. The indices also appear to be lagging behind other economic indicators, like retail sales or industrial production.
The analysts at Cass were not optimistic either, writing that, ‘In our view, U.S. freight volumes (the amount of “stuff” moving around the country) will not return to 2019 levels until 2021 at the earliest. Given the most recent Cass readings, there is still a wide gap to bridge.’
The transportation index is broken down into four sections – shipments, expenditures, truckload linehaul index, and intermodal price index. Not one improved since last year, and most saw a double digit drop. Shipments and expenditures both gained between May and June. Let’s take a look at each one.
Cass Freight Index – Shipments
Shipments are up 3.5% monthly but fell 17.8% since June 2019. This is slightly better than last month’s dismal reading (23.6% annual decline!), but still depressing. It lags rail volumes, which have slowly improved in June. Analysts at Cass believe that this does not bode well for the economy as a whole.
‘We believe the stock market run over the last few months has, therefore, largely been a function of very low interest rates (higher valuation multiples) and not a function of a better economy (higher earnings)…This recovery is still in the early stages, and certainly the timid consumer is unlikely to increase spending near-term (without further government ‘assistance’),’ the report reads.
Cass Freight Index – Expenditures
Freight expenditures had a similar story to shipments. The amount spent by shippers declined by 18.3% year over year in June, while climbing by 6.4% since May. Still better than May’s number (21.2% annual contraction), still bad by any other measure.
Truckload Linehaul Index
Trucking linehaul rates continued their decline in June, strangely. Truckload linehaul rates dropped 5.9% annually, even greater than May’s 5.0% year over year fall. The Cass report’s author writes, ‘Supply is only coming out of industry, so why are rates not moving higher as demand recovers? We have heard that through the pandemic, shippers are continuing to be difficult in truckload contract rate negotiations. This may soon change, but we haven’t seen it yet.’
On the other hand, spot rates are moving into recovery territory. Spot rates rose 9.8% since June 2019, for dry vans, and 4.6% for reefers. Flatbed rates are only 4.4% lower than last year at this time.
Intermodal Price Index
The intermodal price index, which measures total per mile costs fell 16.8% annually (and 3.8% monthly). Some of this can be attributed to shrinking diesel prices, according to Cass. Prices are off by nearly 20% year over year, which likely explains part of the difference, but not all of it. ‘We are surprised rates are not stronger, unless the contract pricing is lagging truckload and still under pressure.’