Key Indicators for April 2019.

I was reading through the KBCM Fowler Key Freight Indicators for April 2019 and came across some interesting facts about the current transportation economy.

Overall according to KBCM they felt the indicators pointed toward a continued moderate trend into April.

They give a number of indicators in their report, but we want to focus on just a few of them.

Overall ATA Truck tonnage was up by 5.6% as compared to last year. These numbers were based on February data, so it is pretty encouraging that the total tonnage increased during that time period. Sometimes, February can be a slow month in Transportation; however, the tonnage index was at 117.4 for February which is substantially higher than the 104.7 four year average.

This is promising as we look into 2019.

The total business inventory/sales was at 1.38 up 2.7% year over year and over the 1.36 five year average. Again, promising.

New housing starts are down year over year which could be a warning sign for the flatbed segment. Dry van contract rates were up by 6% year over year which is a good sign on the consumer side.

One thing that I thought was really encouraging was that Class 8 vehicle production was up 25.2% year over year. This either means the transportation industry is expecting an increase in overall fright in the near to medium term or they are replacing an aging fleet that they have put off replacing.

Based on personal conversations with people within the industry I believe it is a little bit of both; however, I got the impression that a lot of smaller and medium sized carriers are trying to increase their fleet size because of the increase in freight and rates over the past couple of years. If this is true then what we could be seeing is people jumping on the trend instead of industry experts expecting rates and freight to continue up.

I think there is one other major factor in the increase in class 8 vehicle production increases. I feel that the manufactures put off building new vehicles until the need was as the critical point. Therefore, this might not be as much of a promising look toward the future as it is a catch up period that has been put off too long.

Another concerning item was the fact that the Internet Truckstop Market Index was down over 35% year over year, but at least it was still over the five year average. Because the five year average is not that high we are not that encouraged by the fact that the number is still above the five year average. Perhaps, the year over year reduction is an aberration, we will see next month. However, it is never good to see a 35% year over year reduction.

The other major thing that we took from the KBCM report was that transportation company equity performance and valuation decreased as a whole across all major segments including truckload, Less than truckload and logistics.

Overall, as we reviewed the report and compared it to what we are hearing we are not convinced that freight rates and demand are going to continue up as we move into 2019 and certainly not into 2020. We will have to see what the trends look as we get into Spring and Summer. But, remember new trucks are being added as we mentioned in the increase in class 8 vehicle production. Are the majority of these replacement vehicles or do they represent an increase in capacity which could further drive down rates unless freight volume increases substantially to offset.

Let us know what you think.