Volumes Up but Rates Down in May versus April

Cass Information Systems is fresh out with its freight report, and while results are mixed, they hardly - for now - indicate a freight recession some industy pundits have been predicting.

Surpply Chain Digest Says...   Soaring diesel prices are of course an issue. Cass estimates that - depending on the mode - fuel costs alone are currently adding roughly 10% to the cost of freight on a year-over-year basis. What do you say? Click here to send us your comments Click here to see reader feedback

The monthly report from Cass and partner Tim Denoyer of ACT Research, based on data from the billions of dollars of freight bills that Cass pays for its shipper clients.

The Cass Shipments Index, which includes multiple modes but is weighted towards full truckload freight, rose a solid 4.0% in May versus April on a seasonally-adjusted basis, after a small month-over-month decline the previous month.

However, the shipments index was down 2.7% versus May 2021.

Denoyer commented on the results that "After a nearly two-year cycle of surging freight volumes, two key drivers of growth for the freight cycle - goods consumption and inventory restocking - are faltering."

The May  the expenditures component of the Cass Freight Index, which measures the total amount spent on freight, fell 4.9% month-over-month, while there was an increase in seasonally-adjusted shipments 4.0%. That implies rates are falling, as expenditures dropped even as shipment volumes decreased, with what Cass calls "inferred" rates down about 9.5% in the month.

"It’s tempting to see this as a sign that freight rates have peaked," Denoyer said, noting that supply and demand fundamentals have certainly turned looser this year, so it wouldn’t be an unreasonable conclusion."

2022 has also seen a major improvement in driver availability, and a flattening of freight demand, Denoyer added.

"This is a deflationary combination, though it will take several months to filter from the spot market into contract rates," he adds.

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However, with the large declines in spot rates coming just ahead of the big spring contract season, the lead time between spot and contract rate changes may be compressed somewhat, Denoyer predicts.

Soaring diesel prices are of course an issue. Cass estimates that - depending on the mode - fuel costs alone are currently adding roughly 10% to the cost of freight on a year-over-year basis.

Another look at rates comes from the Cass Line Haul Index, which measures US per mile contract truckload rates before fuel surcharge and other accessorials.

In May, that index was up 13.2% year-over-year to 168.6 after rising 14.1% in April.The index baseline is January 2010, set at an index level of 100. That means truckload rates are up about 67% since then, or about an average of 4.3% per year.

Each month, Cass nicely summarizes the state of freight, as seen in the graphic below for May:

Source: Cass Information Systems

Interestingly, however, the report notes that just as we seem to be hitting a freight plateau, trucking employment rose the most on record with 27,300 new jobs added in the past two months.

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