Truckload Volumes Down

The Morgan Stanley Truckload Index stood at all-time seasonal lows through December 26, 2008 and “current readings are half the levels of 4Q01. Looking at the individual components, incremental supply appears to be stabilizing, but incremental demand continues to slide. “

Morgan Stanley also noted that SpendingPulse, which tracks MasterCard transactions, was estimating a 4% year-on-year decline in retail sales (excluding autos and gas) for December, “marking one of the worst holiday seasons in modern history.” The slowing global economy, credit crunch, and severe weather all combined to produce disappointing holiday figures, said Morgan Stanley. “The only relative upside for transports could come from the source of the weakness. The greater decline in luxury goods and deep discounts may imply that traffic and unit sales outperformed dollar sales. Remember that carriers are more concerned about changes in inventory and traffic than actual sales dollars.”

The North American research firm continued, “With our economist forecasting steep declines in GDP and industrial production over the next several quarters, we think it is too early to get excited about truckload stocks as an early cycle play. Freight demand continues to deteriorate, and even with carriers leaving the industry, the pricing environment should remain difficult (at least until demand stabilizes). With the trough in TL earnings likely still several quarters away, earnings risk remains. However, we would note that TL carriers have less operating leverage than other freight companies and will benefit from easy fuel comparisons over the next couple of quarters, which could help limit downside risk.”

The Morgan Stanley Truckload Freight Index is a proprietary and broad-based measure of incremental truckload demand (numerator) versus incremental truckload supply (denominator).