US Freight Volume Drops to Lowest Level since 2009, “Industrial Recession” Hits Full Stride, Overcapacity Crushes Rates

“We’ve been patiently waiting for the consumer.”

This just keeps getting worse. The Cass Freight Index, tracking US shipment volumes by all modes of transportation, fell 3.1% in September from a year ago, the 19th month in a row of year-over-year declines, and the worst September since 2009!

Donald Broughton, Chief Market Strategist at Avondale Partners, wrote in the report:

After offering a glimmer of “less bad” hope in August [the index was down “only” 1.1% year-over-year], the Cass Freight Index shipments data in September disappointed, providing hindsight that August only gave us “false hope.”

September data is once again signaling that overall shipment volumes (and pricing) continued to be weak in most modes, with increased levels of volatility, as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels.

There were some areas of growth for shipments. Ecommerce has been reliably booming, as brick-and-mortar retailers lose their footing, a structural shift in the retail industry that will continue to play out over the years. Shipments for the auto and housing/construction industries also grew in September, but at a lower rate.

Alas, shipping for the auto sector will be getting hit further: sales declined in September year-over-year, inventories have reached worrisome levels – 95 days’ supply for F-series trucks, when 60 days is more than enough – and production cuts and layoffs are already being announced.

“Bottom line, the Industrial Recession in the US that began in March of 2015 continues to weigh on overall volumes,” Broughton writes.

The Cass Freight Index is not seasonally adjusted, so it shows strong seasonal patterns. In the chart, the red line with black markers represents 2016. The multi-colored tangle above it represents the years 2011 through 2015. In terms of the goods-producing economy, which relies on transportation to get its merchandise delivered, this is the “economic recovery” in 2016 so far. Note that September is supposed to be the peak shipping season, but the index declined instead of rising:


The index is based on “more than $26 billion” in annual freight transactions, according to Cass Transportation. It does not cover bulk commodities, such as oil and coal but is focused on consumer packaged goods, food, automotive, chemical, OEM, and heavy equipment, shipped via truck, rail, barge, and air.

Among those categories, rail has been taking the biggest hit in recent months, and did so again in September, with volumes of containers and trailers (intermodal) falling 4.2% from a year ago, adding to the gloomy scenario of the past two years in the bulk sector [read… Rail Freight Gets Clocked from all Sides in this Economy]

For a “more reliable” gauge of the “pulse of the domestic economy,” Broughton points to trucking, with its focus on manufacturing and retail.

We should note that as the first industrial-led recovery (2009-2014) since 1961 came to an end [in March 2015], and the shift from “brick and mortar” retailing to e-commerce/omni-channel continues, we are becoming more focused on the number of loads moved by truck and less focused on the number of tons moved by truck.

Tonnage has been inching up, and its 3-month moving average has not declined since the Financial Crisis. But not so truck loads. They’ve declined year-over-year in four of the past six months:

No matter how it is measured, the data coming out of the trucking industry has been both volatile and uninspiring.

With total shipping volumes declining, the amount spent on shipping has also declined, down a “less bad” 3.8% year-over-year, after having plunged 6.3% in August, 5.1% in July, 8.8% in June, and 10.1% in May. It was the lowest September data point since 2012:


The September decline in expenditures was “less bad” for the wrong reasons: the rising price of diesel fuel over past six months. And it was not due to an increase in pricing power: “As an example, the proprietary Cass Truckload Linehaul Pricing Index (which does not include fuel) fell 3.5% on a YoY basis in the month of September.”

Overcapacity has infected trucking, rail, air freight, barge, ocean container, and bulk, the report points out. Since “the industrial-led recovery (2009-2014) in the US” ended, “we have been patiently waiting for the consumer to take the baton of leadership in economic growth.”

And that’s precisely what has not happened.

Since businesses stocked up for this great consumer recovery, inventories started to accumulate in late 2014 and built to crisis proportions by early 2016, with the inventory-to-sales ratio hitting levels last seen after the Lehman bankruptcy. When business inventories increase, they add to GDP by the magic of the GDP formula. When they decrease, they subtract from GDP. Businesses have been trying to whittle down their inventories. And inventory declines have hit GDP for five months in row now.

This is the longest stretch outside of a recession since 1956-57 and the largest in magnitude since 1995. We expect de-stocking to continue into Q3 in retail, based on the NRF’s (National Retail Federation’s) Port Tracker survey. We remain concerned about elevated levels of cars on dealer lots, and we acknowledge continued efforts to streamline finished inventory in most machinery sectors.

It’s going to get worse. Automakers are now trying to cut inventories via a mix of large incentives and production cuts. Ford already announced, “We continue to match production with demand.” And demand has been lousy. Read…  It Starts: Shutdowns, Production Cuts, Layoffs at Auto Plants

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  36 comments for “US Freight Volume Drops to Lowest Level since 2009, “Industrial Recession” Hits Full Stride, Overcapacity Crushes Rates

  1. Ptb says:

    I would have guessed a peak in October and November for Christmas season. But it looks like summer into fall is the busiest time.
    When you consider that the huge number of consumer that are the under 40 and over 55 crowd, the retail sector has cause for grave concern as the younger crowd is not consumer oriented and the retirement crowd is not known for this either. Income constrained?

    • RE: …as the younger crowd is not consumer oriented and the retirement crowd is not known for this either.
      Yes, but the huge 5$ cost of living increase in Social Security should kick start the economy. ;-(

      FWIW: Given that people on Social Security spend almost every cent they receive, why not inject the ersatz QE money into the economy by giving each social security and VA pension recipient a 500$/month “bonus” for 6 months. To be sure the money will still wind up in the bank vaults to be used for stock buy backs, economically pointless M&A, etc. but will circulate through the economy a few time first.

      • EVENT HORIZON says:

        Because it does not benefit the owners of the Federal Reserve Company. Do some research.

        • Kasadour says:

          Exactly right. In fact FED and other central banks are going to start buying stocks to benefit the assets markets. They don’t give one rat’s a$$ about the consumer.

          In that case, who cares about freight volume and any other fundamental economic indicator when central banks print money to buy stocks and corporate bonds? soon they’ll print money to buy every hard asset on earth and to he** with the average consumer.

      • Tom Kauser says:

        Another step would be to end the Federal Reserve pull its charter and transfer the balance sheet to social security?
        We could export trillions of dollars to buy foreign goods to consume as we employ ourselves to wait for another monthly spending spree?
        More lava lamps a lot less war!

    • EVENT HORIZON says:

      My wife has a great personality, not like me….. People actually like hersince she tells them what they want to hear…………. She is “nice”. …….She has lots of friends. … she is a total fraud and “can’t stand” her best friends………………..Now, me?, nobody likes me.

      Anyway, the point here is that she and all here “close friends” no longer shop and buy Chinese junk to give to each other. They have lunches, or dinner parties, and bring food and fun. No Chinese Junk (pun there).

      The Merchants of Venice have destroyed Christian Christmas for not respecting Christian Christmas (and I am a hopeless Atheist).

      Stop buying. Stop shopping. Return to Family and loving children.

  2. joel says:

    And what is the response of the stock markets? Up. So what are they thinking? This is not sarcasm, but a serious question. I’m with Sergeant Schultz: “I know nutting”

    Any speculation would help.

    • I’m forever blowing bubbles, pretty little bubbles that float through the air…

      • joel says:

        That song is extremely nostalgic for me. My dad used to sing it around the house. He would have been 17 if that song came out in 1919, I suppose it imprinted. I’m Forever Blowing Bubbles and Home on the Range were his repertoire. As far as I knew he never actually blew any bubbles, just worked long hard hours for us.

    • Wolf Richter says:

      Check with the central banks. They’ll tell you. Inflating asset bubbles is their number one job. And they’re doing it pretty well, mostly.

      • Tom Kauser says:

        Inflating asset bubbles is the end result of not being able to clear out the systemic debt on the balance sheet!
        Someone better start thinking properly or no one will be left with anything!

      • dave says:

        wolf for auto inventory, is it days of sales inventory or days of production inventory?? i assume its sales inventory but want clarification. a week of down time will eliminate how many days of inventory?

        • Wolf Richter says:

          Inventories on dealer lots, as measured in days of dealer deliveries. September days’ supply is measured as inventories at the end of September and September deliveries.

          If only one plant makes that model, and that one plant is shut down for one week, and sales are about the same as the production numbers, it will eventually lower inventory by one week, all other things equal. But it takes a while for production cuts to filter into dealer inventories. And since production exceeds sales at the moment, the calculus is already off,

    • EVENT HORIZON says:

      WHO is buying in the market? Know this, if the Market collapses, it is all over.

    • Dave says:

      I said this a few months ago in this same blog, I dont think the market will go up or down until shortly after the elections. When I say shortly, I’m thinking within 6 months. The market is being propped up for now.

      Thats my opinion and it’s as good as any of the pros and so called experts!

      • DanR says:

        As an open question, one I have no easy answer to, is what proporion of asset price movement is a random walk and what is based on credit and money supply manipulation?

        • Tom Kauser says:

          If ten trillion disappears in a 250 trillion dollar world will there be an earth shattering ka-boom

  3. TulsaTime says:

    Looks like a recession, sounds like a recession, but I’m sure it is nothing until after the election.

    • Tom Kauser says:

      Eight years ago it was the exact same narrative and we still talk about 2008 and not much about the election that followed it?
      Except about the duo ruin!
      Markets want to clear 365/24/6.5 days and when they don’t hello and/or goodbye holiday?
      Neither candidate talked of stimulus! I believe that will change?

      • There is a mild nudge as a “stimulus;”
        There is an elbow in the ribs as a “stimulus;”
        There is a size 15 boot with a copper toe in the butt as a “stimulus;”
        and then there is a large quantity of methamphetamine or cocaine surreptitiously slipped into your drink as a stimulus…

  4. EVENT HORIZON says:

    Very, very, very simple solution to economics problems:

    1) Gold as money and money as Gold

    2) If you want to sell it here, you make it here.

  5. bead says:

    Trading profits are way up. A Fed success. There’s a new iPhone! Apple success. Alphabet is going to the moon. Netflix is up 20% in a few days. Facebook will double. Oil will make a big comeback. Millennials are buying houses in their millions as they find the great paying jobs. Buy the dips, there is no alternative. I’ll be gone, you’ll be gone. Either join the party or be left behind. A new Wall Street friend will be elected in a landslide! There’s so much good news that you can’t help but buy in. Slow and steady as she goes. Rates will stay where they are while the economy builds up its head of steam.

    • Mike B says:

      ROTF! +1

      Your snark-fu is impressive ;)

    • EVENT HORIZON says:

      As long as you can print “money” with “notes”, there is no end to the party. Issue “credits”, print “Notes” and we can party on, dude.

    • NotSoSure says:

      Another +1. If freight index goes down, you make money by betting that freight index will go down. That’s how real capitalists make money!!!

      At the end of this experiment, it will either be everyone will be rich or everyone will be poor. Guess which is more likely.

    • Tom Kauser says:

      Silk worm excrement is also producing fun results!

  6. Mike B says:

    Well.,,,,,, Look on the bright side. There should be some amazing deals on Black Friday / Cyber Monday this year to clear out all of that inventory buildup ;)

    Yes, that was me being completely cynical. We have reached ‘peak everything’ and our consumer ‘culture’ is in full-on fly meet windshield mode.

    (and it needs another description because I hate to debase the word ‘culture’ that way)

    • polecat says:

      I can hardy wait for the Black Friday melees’ to ensue this year ……. should be one for the record books ! ‘:]

      • Tom Kauser says:

        It was way better when they had to wait outsidel
        Now they stand around all day asking you how much you make?

    • WTFrogg says:

      And we all know what is the last thing that goes through a fly’s mind when it hits your windshield…right ?? LMAO

  7. economicminor says:

    Everyone keeps expecting a Tsunami to wash the shore line clean of debris and what is happening is more like a candle melting down slowly.

    Which doesn’t mean the candle doesn’t light a fuse that blows the whole thing up but we aren’t there yet.

    And when we get there, it will be a big surprise to most everyone because Group Think believes in the Mystical FED..

    • night-train says:

      Well said. And what about the unintended consequences of the FEDs policies? I expect these chickens will come home to roost for many years to come.

      • economicminor says:

        If you have lots of debts against lots of assets that fall in value because the asset was not of sufficient productive value as to justify or support that value was this an unintended consequence or was it fraud and greed?

        Before the NEW world order, this kind of action was considered fraud as those professionals selling the swamp land in Florida or housing tracts built on fill were not doing their fiduciary duty to their clients when with out proper disclosure they led their clients to believe that the pig with lipstick was indeed more than just a pig with lipstick. It never was and never will be an astrophysics professor or be able to dance with the Rockettes.

  8. Jonathan says:

    Quick, lets give the same bullshit excuses like consumers migrating to towards good-less services, just like the so-called China’s transition to a consumer economy, to explain away “unexpected” weaknesses that doesn’t fit in our model!


  9. Hey Driver says:

    I don’t believe Cass or any other freight or economic index. They’re all BS. I believe what I see with my own eyes.

    What I see is Interstate 5 awash in trucks, another load waiting for my truck as soon as I can deliver the one I have on, and no parking places at night.

    I know it can turn on a dime, but………..

  10. Edward E says:

    Julian must be really busy, hopefully… It was a busier summer for us. In fact the only slow down I had was when Yellin did the hike before Christmas, lasted to late spring. Made a lot of money from 2008 through 2015…

    I’m going to punt to the other drivers… been watching the yard fill up with deer this fine evening, now I understand why the neighbors put a tree stand in my yard. There is a monster buck (biggest in the county maybe) hanging around. Knew he was there because last month you could see where he was rubbing velvet off his antlers on all the trees. So I put snow fence surrounding the trees don’t want him to strip, possibly killing them. May try to put him in the freezer since chronic wasting disease has shown up recently nearby. Have seen the yard fill up with eight wild turkey sometimes.

    Building a pole barn for the John Deere, reserved a boom to use on cutting back some tree limbs and to bleach & scrub the algae off the roofs. Brush hogging, bringing in some loads of gravel, doing an RV interior on the van and catching up countless other neglected chores from over the years. Lots of hard work going on here, be plenty ready to get back in the saddle when the time comes.

    Over at Commercial Carrier Journal, entries about Volvo declining sales and layoffs, tonnage stumbles & rates, new trailer orders slide allowing catch up on backlogs, etc. They forecast good growth going forward, I might just have to buy a truck again. Close to having enough without getting into debt, but best not to talk, don’t want to jinx it, besides the gray fox is barking so better get out there and feed him. Ttyl

    Though the trucking industry will likely see declines in freight and revenue in 2016, this year’s only an outlier when looking at the industry’s long-term trend, says the American Trucking Associations in a new report.

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