Executive Briefings

No Major Growth in North American Freight Volume, But Costs Continue to Rise

North American freight volumes saw no change from November to December, according to the Cass Freight Index. Freight costs, however, continued to climb, showing a 1.8-percent rise from November. Year over year, freight costs were up an astounding 18.8 percent against an increase in freight volumes of only .7 percent. Several factors have contributed to increases in freight transportation costs. Overall, Q4 2011 was very weak, with freight volumes falling 12 percent from Q3 - a much larger decrease than is seasonally normal.

In December, overall North American freight expenditures rose on the strength of increased rates, not volume. Railroad rates have been climbing throughout the year, some as much as 15 percent, and railroad companies' financials have performed very well in 2011. Truck companies have also been increasing rates in most markets (four percent on average) and are expected to continue to do so in 2012, as capacity is expected to remain tight.

Continued cost pressures from labor, fuel and regulations are consuming most of the increased revenues in the trucking industry, leaving little for new capital investments in equipment. Although orders for Class 8 trucks are healthy, they still are not meeting much more than replacement needs. Intermodal volume continues to grow as more trucking companies faced with capacity or driver shortages turn to railroads for some part of a move. Railroad rates rose faster, on average, than truck rates, which factors into the magnitude of the change in overall transportation costs.

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North American freight volumes saw no change from November to December, according to the Cass Freight Index. Freight costs, however, continued to climb, showing a 1.8-percent rise from November. Year over year, freight costs were up an astounding 18.8 percent against an increase in freight volumes of only .7 percent. Several factors have contributed to increases in freight transportation costs. Overall, Q4 2011 was very weak, with freight volumes falling 12 percent from Q3 - a much larger decrease than is seasonally normal.

In December, overall North American freight expenditures rose on the strength of increased rates, not volume. Railroad rates have been climbing throughout the year, some as much as 15 percent, and railroad companies' financials have performed very well in 2011. Truck companies have also been increasing rates in most markets (four percent on average) and are expected to continue to do so in 2012, as capacity is expected to remain tight.

Continued cost pressures from labor, fuel and regulations are consuming most of the increased revenues in the trucking industry, leaving little for new capital investments in equipment. Although orders for Class 8 trucks are healthy, they still are not meeting much more than replacement needs. Intermodal volume continues to grow as more trucking companies faced with capacity or driver shortages turn to railroads for some part of a move. Railroad rates rose faster, on average, than truck rates, which factors into the magnitude of the change in overall transportation costs.

Read Full Article