Freight shipment and spend see Q4 and annual declines, notes U.S. Bank Freight Payment Index

Coming off of a mixed third quarter, freight shipment and spending levels were down across the board on a sequential and annual basis, according to the most recent edition of the U.S. Bank Freight Payment Index, which was recently issued 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 $23 billion in global freight payments for U.S. Bank’s corporate and federal government clients.

The report’s National Shipment Index—at 126.5—was down 4% from the third quarter to the fourth quarter, compared to the mild 0.3% decline from the second quarter to the third quarter (and a 9.7% increase from the first quarter to the second quarter) and was off 5.4% annually, compared to the 0.1% declines from the second quarter to the third quarter, representing the sixth consecutive quarter of annual declines and the first annual shipment decline going back to 2012. For all of 2019, shipments fell 5.9%, which the report said was the largest annual decline since 2011.

The report explained that the fourth quarter decline was due, in part, to the international trade environment, adding that progress has been made on the trade front between the United States and China irregular trade volumes have hindered truck freight movement. It also observed that while tariffs on various consumer goods did not take effect until December 15, as originally intended, it was likely a fair amount of the goods moved earlier in the year to warehouses, which also impacted fourth quarter volumes.

On the spending side, the report stated that the spending index—at 195.2—was off 2.7% from the third quarter to the fourth quarter, following a 0.3% decline from the second quarter to the third quarter, and was off 2.5% annually, with the latter down for the first time in three years.

Addressing the decline in spending, U.S. Bank pointed to the combination of lower contract rates, coupled with low spot market pricing that put downward pressure on the spend index. For all of 2019, spending rose 3.4% annually, which the report said was “remarkable considering that volumes were off significantly” but marked the smallest annual increase since 2016. And it added that the annual spend gains were paced by solid performances in the second and third quarter.  

“Economic forecasts would fall under 2% gross domestic product growth in the final quarter of 2019,” the report said. “For trucking, the falling factory sector is having a significant impact on shipments and spend. Truck sales have exceeded the demand for the added capacity. Freight levels will likely remain sluggish into the second quarter; however truck shipments could start to improve as capacity starts falling with fewer truck purchases as well as carrier closures.”

The U.S. Bank Freight Payment report provided an overview of third quarter performance in five U.S. regions, including:

• Southeast: For the full-year 2019, this region saw a relatively small 1.6% decline in the shipments index and a 12.6% surge in the regional spend index;
• West: Compared with 2018, shipments were down just 2.1%, while spending was up 6.4% for all of 2019;
• Midwest: Shipments fell 5.4% in Q4, and spending contracted 3% (vs. Q3 2019;
• Northeast: The shipments index contracted 7.1% in Q4 vs. Q3 2019, and spending decreased 7% during the same period; and
• Southwest: Shipments contracted 7.3% in Q4 (vs. Q3) to the second lowest level in 2019, and spending contracted 5.3% for the same period

“I think it’s remarkable that overall spend was up on a full-year basis for 2019,” said Bob Costello, senior vice president and chief economist for the American Trucking Associations, in the report. “It shows great resiliency given the challenging freight environment. Even though the U.S. economy is not in a recession, the factory sector is, and it’s absolutely impacting truck freight volumes and spending. But there are some bright spots. The U.S. has taken the first steps of an agreement with China, and spending is up in some parts of the U.S. due to a surge in construction activity.”