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Possible green light as U.S. rates rise

WASHINGTON, D.C.: FedEx Freight, the LTL subsidiary of FedEx Corp., is to increase rates by an average of 3.9 percent from March 31 this year for shipments within the U.S. and NAFTA countries Canada and Mexico.

According to the latest CASS freight index, the move reflects the reversal of a two-month decline as overall U.S. expenditure increased 6.8 percent in February – the highest for that month in the index's history.

Total spending on U.S. freight movements was up 6.4 percent year-on-year and 15.8 percent higher than the same month two years ago. According to analyst Rosalyn Wilson, author of the monthly index, "things are looking up" although she cautions there are still "many potholes to deal with".

She notes the U.S. Institute for Supply Management's PMI reversed a two-month decline and rose 1.9 points to 53.2 in February – although still close to the index level of 50 indicating a contracting industrial economy. However new orders rose 3.3. points last month as the order backlog grew 4.0 points. Wilson says these figures point to increased production in the next few months and therefore more freight to move.

However the CASS index is not all green lights: U.S. production was down for the third month in a row, this time falling 6.6 points to below the 50 mark and therefore not good for carriers looking for increased volumes. Farther down the supply chain, China's PMI also declined in February and now sits at 50.5. And while U.S. export orders fell from 49.8 to 49.3, imports have slowed considerably - not a positive for the freight industry.

Wilson, who is author of the annual logistics report for the Council of Supply Chain Management Professionals, concludes: "There are still some strong headwinds to overcome in the freight sector - the most obvious being the nearly imperceptible growth in volumes. The global marketplace remains weak, so our exports are lagging expectations. While unemployment continues to fall, the number of new jobs created each month is not enough to sustain the economy... continue to expect a bumpy ride."

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