Is trucking industry slowing down? One analyst says not really

| 6/30/2011

According to the American Trucking Associations, the total tonnage of freight hauled by truck fell by more than 2 percent from April to May. Those figures are collected from ATA’s member reports.

And when viewed from a year-to-year standpoint, while May tonnage this year was up nearly 3 percent from last May it was still the smallest gain in nearly a year-and-a-half.

So is the trucking economy slowing down?

Not really, according to analyst Donald Broughton of Avondale Partners.

He explains that at this time last year a lot of Chinese manufacturers were shipping their Christmas products to the U.S. early to take advantage of a tax break that was about to expire. And that, he says, distorted the freight picture.

He says the Chinese announced in December of 2009 that the refund of the value added tax – called the VAT – would expire on July 15, 2010.

“When you manufactured a product, you had to pay a tax. If you manufactured and exported it, you could apply for a refund of the value added tax. After July 15 of last year, that was no longer true.”

Broughton said that prompted a number of large manufacturers to pull forward their demand for the fall and ship it earlier in the year in order to get the refund of the VAT.

“As a result, April and May and June of last year were stronger than it should have been seasonally. June was the strongest freight month when normally it’s October, from a seasonal perspective. This year, there’s no such event, so you’re running against very tough comparisons. What looks weaker now will actually look stronger in the back half of the year.”

Broughton also thinks that with fuel prices moving down, consumer spending will pick up, producing more freight.