April Cass Freight Index report sees further declines

The March edition of the Cass Freight Index, from Cass Information Systems, was a hard story to tell, with the report highlighting how the ongoing COVID-19 pandemic is taking a toll on freight shipment and expenditures levels and also noting more pain would be forthcoming in the months to follow.

That came to fruition with the April edition of the report, which was issued this week, showing drop-offs to what the report called “recessionary levels.”

Many freight transportation and logistics executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

“The Cass Freight Index showed the expected dip in activity last month, after all the March consumer panic buying subsided, leaving us with just the negative impact of shut-in orders and rising unemployment levels,” wrote David Ross, the report’s author and transportation analyst at Stifel. “For April the overall index for both shipments and expenditures fell sharply y/y to recessionary levels. This is concerning but would be more concerning if it weren’t a self-inflicted wound. Businesses and mobility were severely limited by unprecedented governmental restrictions in April, and those are loosening here in May and should further loosen on their way back to ‘normal’ in June.”

April shipments—at 0.923—dropped 22.7% annually and trailed March by 15.1%, the report noted. On a two-year stacked change April shipments saw a 25.2% decline.

Ross noted that May should improve on the shipment side, with April marking the bottom. The optimism for May was tied to the U.S. economy slowly beginning to re-open, with some manufacturing plants resuming operations and many automotive OEMs looking to re-open in the coming weeks.

“April was much like March in that if you moved groceries, home improvement, e-commerce and consumer staples, you had steady demand while restaurant, auto, and (mall) retail were essentially not moving anything,” Ross explained.

May expenditures—at 2.379—saw an 18.2% decline and were off 10.3% compared to May and fell 13.2% on a two-year stacked change.

The report observed that this reading was initially expected to be even lower, due to the Cass intermodal and truckload linehaul indexes dropping and fuel declining.

“How could freight spend be down less than volumes, if rates were going lower?” asked Ross. “We believe it was a mix issue in that the freight that was moving was higher revenue per shipment, due to average length of haul (which has a negative impact on TL yield). So, those customers who remained open for business had a higher freight cost per shipment than those who were closed. We believe expenditures on an apples-to-apples basis were down more than volume and lower fuel surcharges will continue to provide shippers some relief on freight costs in the near-term.”