June Cass Freight Index report is solid

Most key metrics in the June edition of the Cass Freight Index Report from Cass Information Systems, which was released yesterday, were in the right direction, with both freight shipments and expenditures posting annual gains for the sixth consecutive month.

Many freight transportation and logistics executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

“Throughout the U.S. economy, there is a growing number of data points suggesting that the economy continues to get better,” wrote report’s author, Broughton Capital Founder and Managing Partner Donald Broughton. “Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong.”

June shipments, at 1.163, were down 0.4% compared to May, which was up 7.1% annually and its highest level going back to August 2014, and up 4.8% annually, continuing the streak of steady shipment growth that has remained intact going back to October 2016.

Broughton wrote that data suggests consumers are finally starting to spend more, although that spending is no occurring at brick and mortar retailers. And he also explained that with the surge in the price of crude last October, the industrial economy’s rate of deceleration initially eased and was then followed by a modest improvement paced by the fracking of drilled uncompleted wells of DUCs in fields with a lower marginal production cost like Permian and Eagle Ford.

“We have been questioning, ‘How fast will the recovery from here be?’” wrote Broughton. “However, the overall freight recession, which began in March 2015 appears to be over and, more importantly, freight seems to be gaining momentum in most segments.”

June freight expenditures at 2.497 were up 1.9% compared to May and saw a 5.4% annual increase, which was below May’s 7.4% annual increase and in line with April’s 6.0% increase.

Expenditures growth has been strong going back to January 2017, when they turned positive for the first time in 22 months and also represented the lowest level for freight expenditures since 2011 when the economy was still coming out of recession.

“Our Expenditures Index in January 2016 was the worst in five years, as demand had weakened and crude oil had fallen below $30 a barrel,” wrote Broughton. “Although February and March of 2016 were also weak, they were not nearly as weak as January 2016 and hence a slightly tougher comp. Since fuel surcharges are included in the Expenditures Index, fuel was a negative bias in the data last year. Conversely, over the last several months, we have observed that part of the increase was a result of the relatively steady increase in the price of fuel over the last nine months. But we are also seeing some improvements in the pricing power of truckers and intermodal shippers.”