Truckers As Leading Indicator Show Stable U.S. Economic Growth

Rising truck shipments show the U.S. economic expansion is intact, even amid concerns that a slowdown in retail sales and Europe’s sovereign-debt crisis could stall growth.

Two measures of trucking activity signal the industry remains steady and has even "firmed up" since mid-May, according to Ben Hartford, an analyst in Milwaukee with Robert W. Baird & Co. The data complement anecdotal information from carriers that freight demand ended May on a strong note after more weakness than anticipated earlier in the month, he said.

"Trucking trends are reflective of an economic environment that is stable, not deteriorating," Hartford said.

The for-hire truck-tonnage index rose 2.8 percent in April from a year earlier, up from 0.2 percent the prior month, marking twenty-nine months of growth, based on data from the American Trucking Associations. The economy has never contracted without tonnage turning negative first, so the truck figures are a leading indicator, providing the "first signal" of a slump, said Thom Albrecht, an analyst in Richmond, Virginia, with BB&T Capital Markets.

Another index that tracks the movement of goods between manufacturers and consumers also is a "good barometer" of the economy, said Jonathan Starks, Director of Transportation Analysis at FTR Associates. FTR’s index of U.S. truck loadings increased three percent to 115.9 in April from a year earlier, the highest since 2008, based on data from the Nashville, IN-based transportation-forecasting company.

April’s improvement suggests the economy is expanding. "It’s not red-hot, but it’s not stalling, either," Starks said, adding that annual gains above five percent would suggest robust activity. Index growth exceeded five percent between July 2010 and March 2011, the data show, while gross domestic product expanded an average 2.9 percent year-over-year in the same period.

Contacts at trucking companies describe a "seasonally stable demand environment," Hartford said. Albrecht agreed, saying two carriers characterized activity in early June as "robust."

These anecdotal "channel checks" are consistent with sentiment reported by Landstar System Inc. in its mid-quarter update, Albrecht said. The Jacksonville, FL-based trucking company affirmed on May 29 its second-quarter earnings estimate of seventy-one cents-to-seventy-six cents a diluted share. This compares with first-quarter earnings of fifty-seven cents a share.

Both the economy and the operating environment for Landstar are "pretty much as forecasted," moving "in a northerly direction, albeit in a slow and sometimes choppy pace," Chairman and Chief Executive Officer Henry Gerkens said on a conference call that day.

Landstar reiterated its guidance even as U.S. retail sales weakened. A 0.2 percent drop in May matched an April decline that previously was reported as a gain, based on data from the Commerce Department. This prompted some economists -- including those at Goldman Sachs Group Inc., Morgan Stanley, and Credit Suisse AG -- to cut forecasts for second-quarter growth.

The sequential declines are "consistent with retailers’ broader concerns about consumer demand and validate cautious recent inventory strategies among retail and consumer shippers," Hartford said.

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