NEW YORK (TheStreet) -- The vast $700-billion US trucking industry with its 3.4 million drivers that hauled 10 billion tons last year -- 69% of the nation's freight -- is an early warning system for the overall economy. And it's been making the wrong rumbling sounds.
Rates for intermodal containers by rail dropped on a year over year basis in January, February, and March, according to the Cass Intermodal Price Index by Cass Information Systems (CASS). April hasn't been released yet. Cass tried to explain the March decline this way: railroads were facing weaker demand and losing pricing power as shippers were shifting loads to trucks because diesel has gotten cheaper.
But spot rates for tractor-trailers started dropping in April. It triggered all kinds of explanations at the time, for example, in the Journal of Commerce:
"Rather than a sign of underlying economic weakness, the softening spot market may indicate shippers are finding the trucking capacity they need, for now, with contractual partners."
Given the exuberance of record year 2014, carriers have added lots of new trucks to replace older equipment and to expand capacity. Swift Transportation (SWFT), the largest U.S. truckload carrier, added over 900 trucks over the past three quarters, with more to come in 2015. J.B. Hunt (JBHT) added over 1,085 tractors in 2014. Smaller carriers added equipment as well. But by mid-April, the phrase "excess capacity" started cropping up.