Big Shipping Decline

Trucking tonnage declined by a seasonally adjusted 11.1% in December. Which puts us back to the level of December 2000. Very serious to be sure. The end of the world? I doubt it. However we still may have further to fall.

As the Obama administration is fervently working on an economic stimulus package the get the U.S. economy on track, it is clear the freight transportation market is still feeling the pain, based on the most recent truck tonnage index release from the American Trucking Associations (ATA).

The ATA said its advanced seasonally-adjusted For Hire Truck Tonnage Index sank 11.1 percent in December, representing the largest month-to-month reduction since April 1994, when the unionized less-than-truckload industry was in a labor strike. The ATA added that December’s tally marks the third largest single monthly drop since the ATA began collecting tonnage data in 1973.

The ATA said the seasonally-adjusted For-Hire Truck Tonnage Index in December was 98.3 (2000=100), which represented its lowest level since December 2000. On a year-over-year basis, the index was down 14.1 percent, which is the biggest year-over-year decrease since February 1996. During the fourth quarter, tonnage was down 6.0 percent from the same quarter in 2007, according to ATA data.

How about a little explanation of what this means for the economy? Coming right up.

“Motor carrier freight is a reflection of the tangible-goods economy, and December’s numbers leave no doubt that the United States is in the worst recession in decades,” said ATA Chief Economist Bob Costello in a statement. “It is likely truck tonnage will not improve much before the third quarter of this year. The economy is expected to contract through the first half of 2009 and then only grow slightly through the end of the year.”

Costello’s outlook is in line with what has been a difficult period for the freight transportation sector. Aside from the advanced seasonally adjusted For-Hire Truck Tonnage Index increasing 1.7 percent in November, which was the first month-to-month improvement since June 2008. But prior to that, the ATA said that the index contracted a 6.3 percent from June through October.

"With consumer demand falling, inventories are getting stretched out and new orders delayed, and that means lower shipping volumes, which ripples right through the trucking industry,” said a trucking industry executive whom declined to be identified. “Many shippers have begun looking seriously at carrier financial stability. They can't afford to lose even one customer to a service failure, so reliability is more important today than it has ever been."

Now if we could just get the government to stop fooling with the economy maybe things would have a chance to reach an equilibrium on their own. All the government is doing is adding uncertainty and dead weight to the economy. It seems that the geniuses in government don't understand that the purpose of recessions is to shed dead weight. Once enough dead weight is shed uncertainty declines and we are prepared for the next advance.

Cross Posted at Classical Values