Flat is the New Up: Cass Shipping Index Down 12 Straight Months
Unwelcome Change at Cass
On december 10, I received an email announcing "New Partnerships to Help Deliver More Accurate, Relevant Insights"
First, we’ve partnered with the University of Tennessee’s Global Supply Chain Institute to enhance the methodology used to produce our truckload and intermodal indexes, which are widely used barometers of transportation pricing.
We are also joining forces with financial services firm Stifel to provide monthly insights into the freight market dynamics that the data represents. Managing director and head of their well-known Global Transportation & Logistics Research practice, Dave Ross, will author our new Cass Transportation Indexes Report. The report, which will be an adaptation of the existing Cass Freight Index Report, will cover all of our indexes and, by design, be shorter and more consumable than the previous publication.
The November Cass Transportation report, Flat is the New Up, is a hollow version of the former.
- China - Gone
- Global Reports - Gone
- Cass to GDP Comparisons - Gone
- Recession Comparisons - Gone
Most of the hard-hitting analysis is gone. Here are a couple of key snips from the new report.
Cass Freight Index - Shipments
Both the shipments and expenditures components of the Cass Freight Index remain down from their peaks in May and September of 2018, respectively, but both appear to be getting “less bad” with y/y comps not off as much as we saw in October. Over the coming months, expect y/y growth to flatten out, as the industrial economy is expected to bottom, while the consumer remains relatively healthy.
Shipment volumes, which have been negative y/y all year, fell 3.3% y/y in November. We’ve been talking for several quarters now about how we’re in another freight recession (the other being 2015-2016) during this long-tenured economic expansion in the U.S., which shows most clearly in the rail carload, LTL tonnage, and Cass shipment data. Some of this is due to an inventory destock (primarily at the retail level), while much is due to the softening industrial economy (where we believe inventories are still elevated). Moving into 2020, we expect volumes to flatten out but not surge much, and a turn to positive y/y comps in the shipments index could be seen as soon as January 2020.
Cass Freight Index - Expenditures
Freight expenditures (i.e., the total dollars spent on freight), dropped 1.4% vs year-ago levels. Although spending is down, the fact that shipments dropped more than spending implies that pricing remains above late 2018 levels. The fact that average spend per unit is up may sound strange, given the sharp drop in spot truckload rates in 2019 vs 2018, but most shippers move freight through the contract market, which necessarily lags any big changes in supply/demand. Therefore, many contracts that were repriced in 2018 still carried into and through much of 2019. Since the Cass Freight Index is a mix of freight modes (but >50% truckload), the outperformance of expenditures vs volumes reflects not only the aforementioned lag effect but also the better pricing power exhibited by the rail, intermodal, parcel, and LTL sectors. We expect transport pricing growth to moderate in 2020 but remain inflationary, so our forecast is for freight expenditures to modestly outpace a generally flattish volume environment.
Gone - GDP - This is Last Month's Chart
Gone - Eurozone - This is Last Month's Chart
Gone - AsiaPacific - This is Last Month's Chart
Gone - Shanghai - This is Last Month's Chart
Flat is the new up, and less is the new more.
Mike "Mish" Shedlock