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U.S. freight climate still faces “hurdles”

VIENNA, VA: The CASS Freight Index reports domestic freight shipment volumes in North America fell 6.2 percent from November to December last year, making it the largest monthly drop in 2013 and the third straight monthly decline.

In addition, December shipments were 3.2 percent lower year-on-year and 1.8 percent lower than 2011.

In line with the volume decrease, freight spending dropped 5.4 percent from November to December. Given that rates for most modes remained largely unchanged in 2013, CASS says these numbers support other data that the average shipment was larger and therefore more expensive.

The CASS Index does not capture small parcel traffic, so the drop in freight movements was somewhat offset by the increase in small package shipping during the holiday period.

41aRaGVKyAL. SL500 AA300 Despite the U.S. National Retail Federation reporting that Thanksgiving/Black Friday sales fell 2.7 percent, the first drop in seven years, on-line sales were at record highs. With 36.8 million items ordered from Amazon.com on Cyber Monday (December 2), the company had to limit signups for its Amazon Prime service so that it could honor its shipping guarantees to existing members.

"This staggering order volume came at the rate of 426 items per second," says report author Rosalyn Wilson, a senior business analyst with Virginia-based consulting company Delcan Corporation.

Reviewing 2013, Wilson says the freight climate was "mediocre" with the average number of monthly freight shipments 0.7 lower than in 2012. "Inventories remained high, manufacturing stalled mid‐year, and exports and imports were relatively flat for most of the year. All of this contributed to another bumpy year in the recovery that hasn't quite gotten there," she adds.

This was reflected in five three‐year lows in shipment volumes; freight spending that saw eight three‐year highs; a fall in U.S. unemployment and yet the number of new jobs created averaged below 2012.

At the same time the number of workers leaving the U.S. labour pool has now reached near‐historic highs notes Wilson. In addition, the Congressional budget stand‐off in the autumn that forced 800,000 federal workers, and even more contractors, off the job led to a slowing of economic growth in the fourth quarter after a gain of 4.1 percent in the third.

Wilson says imports and exports slowed in the third quarter of 2013; the housing market lagged in the fourth quarter and while manufacturing gained strength for most of the year, it was at a very modest rate of two-tenths of one percent. "2013 was still well below pre‐recession production levels," she adds.

Looking to 2014 the analyst thinks the freight picture "should strengthen as the year progresses despite some hurdles. Globally, new orders are up, but more for exports to developing countries than to the U.S. or Europe. The market for U.S. goods should strengthen by the second half."

Wilson thinks consumers still hold the key to a fully recovered U.S. economy and she warns "there are few signs that they feel confident to resume old spending habits".

Nevertheless she predicts freight growth will still be "measurably stronger" this year with volumes up consistently for several months, putting pressure on capacity before there is a subsequent rise in rates. "The virtual rate freeze that has existed for almost three years should thaw and give way to higher freight expenditures by the second half of the year due to higher costs and volumes."

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