COVID-19 weighs heavily on Q1 U.S. Bank Freight Payment Index

Freight shipments and spending levels showed the impact of COVID-19, or the coronavirus in the first quarter, according to the most recent edition of the U.S. Bank Freight Payment Index, which was issued this week by Minneapolis-based U.S. Bank.

This report, which was initially launched in the third quarter of 2017, is comprised of data on freight shipping volumes and spend on both a national and regional basis. The report’s data is based on the actual transaction payment date, highest-volume domestic freight modes of truckload and less-than-truckload and is seasonally- and calendar-adjusted. Its historical data goes back to 2010, with a base point of 100, and its index point for each subsequent quarter marks that quarter’s volume in relation to the preceding quarter. U.S. Bank Freight Payment processes more than $28.8 billion in global freight payments for U.S. Bank’s corporate and federal government clients.

The report’s first quarter National Shipment Index—at 124.3 (2011=110.1) dropped 1.8% compared to the fourth quarter and was up 3.8% annually. This sequential decline essentially canceled out the 1.7% gain from the third quarter to the fourth quarter. The nearly 4% annual gain was well above the 1.1% annual decline in the third quarter, which, at the time, marked the first annual decline going back to the fourth quarter of 2016.

The report’s author, American Trucking Associations (ATA) Chief Economist Bob Costello, wrote that that, due to COVID-19, there were a few different factors at work impacting the report’s shipment levels.

“While most states implementing stay-at-home orders, freight to grocery stores and other household goods retailers surged in an effort to keep the shelves stocked,” he wrote. “The surge in purchasing household goods in advance of that stay-at-home orders caused what appeared to be shortages of goods in stores. “However, in most cases, it was simply that the supply chain could not keep up with the binge buying. For other market sectors, like restaurants and auto factories, freight shipments slowed dramatically as those businesses closed or reduced service.”

First quarter spend—at 188.1 (2011=110.1)—fell 3.7% compared to the fourth quarter, following a 4% sequential decline from the third quarter to the fourth quarter of 2019, and it was down 2.5% annually.

Costello wrote that these readings were attributed to three factors, including: lower volumes, falling freight rates, and lower fuel prices, which reduced fuel surcharges. The last point was evident, based on Department of Energy data, which found that the average price per gallon of diesel in the first quarter, at $2.88, was down 17.6% compared to the fourth quarter of 2019 and was down 13.5 cents annually.

On a regional basis, the report said that with the exception of the Southeast, every other U.S. region (Northeast, Midwest, Southwest, and West) saw low first quarter shipments and spend levels. It explained that the reason for this is that the Southeast is better set up to handle freight surges, due to having been frequently impacted by hurricanes and other severe storms, too.

Looking ahead, the report said that the second quarter is expected to be challenging for shippers and carriers, with second quarter GDP predictions pegged to be down between 12%-to-30%. And regardless of the decline, author Costello said it will be reflected in truck freight, with carriers expected to shift to areas that have better freight activity.  And with some known and potentially new challenges, Costello said that shipments and spend levels could see significant contraction in the second quarter.

U.S. Bank Freight Data Solutions Director Bobby Holland told LM in an interview that the report made it clear that even though there was surge activity for essential items like household-related goods and medical-related goods in related freight sectors, it was not enough to offset the effect of idled and slowdowns and stoppages in other sectors.

“We expect that the sectors surging right now will continue to do so for a period of time but is being offset by slowdowns in other areas,” he said. “The economy will take a hit into the second quarter, and that was apparent in the first quarter data, especially from mid-March on, which is when stay at home orders across the country went into effect. We will continue to see the effects of that on supply chains. A rebound in consumer confidence will take a while, too. The second quarter will be a challenging quarter all around.”

Looking ahead, Holland said that there is a clear unknown impact for freight, which will become clearer over time to see what the consequences will be.

“Some of this has to do with certain states looking to reopen their economies, and….it is a gray area as to what happens on the other side of that,” he said. “Supply chains may be further stressed and some reports indicate there may be a second wave [of COVID-19] towards the end of the second quarter. We don’t know what the impact is going to be, as we will all have to sift through the rubble and see how it all sorts out, as data comes in. Even with states planning to open up, there is no hard, concrete definition of what that means, in terms of things being business as usual in a new normal. We know it is going to be challenging, and there will be supply chain concerns regarding essential goods, as long as the virus is still having a major impact.”