“Pricing power has erupted…”
The transportation industry, particularly trucking, has benefited from the rise in retail spending in the fourth quarter and in much of 2017. The surge in e-commerce with all the transportation challenges it brings along has been a boon for the industry. Shipments have soared, rates have soared, dollars spent by shippers have soared: companies have been complaining about rising shipping costs and are trying to pass on those costs via higher prices on their goods. But here’s what that looks like from the transportation and trucking industry’s point of view: a view from Cloud Nine.
US shipment volumes by all modes of transportation jumped 12.5% year-over-year in January, according to the Cass Freight Index. The index, which is not seasonally adjusted, hit its highest level for any January since 2007:
Note how the red line (2017) at first timidly and then more aggressively outpaced the black line (2016). In December 2017, shipments had been up 7.2% compared to December 2016. The index normally drops sharply in December with the end of shipping season, but this time the index edged down only a tiny bit.
The index, which is based on $25 billion in annual freight transactions, according to Cass Information Systems, covers all modes of transportation and is focused on consumer packaged goods, food, automotive, chemical, OEM, and heavy equipment — shipped via truck, rail, barge, and air. But it does not cover bulk commodities, such as oil and coal.
The chart below shows the year-over-year percentage changes in the Cass Freight Index for shipments. Note the transportation recession in 2015 and 2016 – and that phenomenal spike in January:
The report warns:
Volume has continued to grow at such a pace that capacity in most modes has become extraordinary tight. Pricing power has erupted in those modes to levels that spark overall inflationary concerns in the broader economy.
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