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October 3, 2011 6:00 AM, EDT

By Rip Watson, Senior Reporter

This story appears in the Oct. 3 print edition of Transport Topics.

The August truck tonnage index rose 5.2%, American Trucking Associations reported, signaling that fears of an imminent economic slowdown are premature, and may be wrong altogether.

The increase in the trade group’s advance seasonally adjusted index was the 21st consecutive year-over-year improvement, a streak that began in December 2009. On a month-to-month basis, tonnage fell 0.2% in August from July, leaving the index at 114.4, ATA’s Sept. 27 statement said.

Bob Costello, ATA’s chief economist, said that August’s slight month-to-month tonnage drop mirrors trends for the year to date, when tonnage has risen for three months and dropped for five months on that basis. That pattern, he said, isn’t a sign “of an economy that is falling off a cliff.”

“Tonnage has been going sideways for much of the year, but it isn’t falling significantly either, which suggests the U.S. economy just might skirt another recession,” Costello said. He added that year-to-year tonnage trends “point to an economy that is growing slowly.”

Recession fears were stoked by the Federal Reserve’s Sept. 21 statement citing “significant downside risks to the economic outlook, including strains in global financial markets.”

In the same vein, Richard Hoey, chief economist for bank BNY Mellon, said Sept. 28 that financial pressures in Europe such as a potential default on Greek debt portend “a global slowdown at a subdued pace rather than a full-scale global recession.”

The latest U.S. economic barometers painted a mixed picture.

The Commerce Department on Sept. 29 revised its second-quarter gross domestic product growth to 1.3%, from 1.0%, but the agency’s report on orders for durable goods fell 0.2%. The Conference Board’s index of leading economic indicators rose 0.3%, the fourth consecutive increase. However, stock prices continued to languish, with the Standard & Poor’s index closing on Sept. 28 at 1,171.05, down about 15% from its 2011 peak.

Fleets and industry analysts shared Costello’s view of freight markets.

Carriers whose shares are publicly traded, such as FedEx Corp., Landstar System Inc. and others, have said in recent days that freight markets remain steady, despite broad economic uncertainty.

FedEx’s Chief Financial Officer Alan Graf on Sept. 22 described the economy as “steady as she goes.”

“This quarter we have been experiencing a typical seasonal pattern with a drop-off in volumes at the beginning of July followed by steady, gradual improvement through the end of August,” said Richard Stocking, president of Swift Transportation, on Sept. 12. He added that third-quarter volume growth is expected to rise about 4%.

“While the stock market is worried about a double-dip recession, tonnage is not leaning that way,” said a Sept. 28 report from BB&T Capital Markets analyst Thom Albrecht. “The [financial] market is focused upon systemic risk in Europe and global economic implications, making it more difficult to assess the current period.”

“The U.S. economy has never had a recession without truck tonnage first going negative,” Albrecht’s note said. “Absent a systemic downturn, we believe the [tonnage] data overwhelming[ly] supports either no recession or, at worst, a mild recession.”

Justin Yagerman, a Deutsche Bank analyst, used the same description as Costello, saying “seasonally adjusted trucking volumes are stable and not consistent with an economy falling off a cliff.”

“Trucking demand has been strengthening sequentially week-to-week thus far in September,” helped by building holiday freight volume and demand for supplies to rebuild storm-ravaged communities, Yagerman’s Sept. 27 report said.

While ATA’s index fell from July to August, the 0.2% drop was less than the average month-to-month decline of 0.5% over the past 10 years.

The group’s not seasonally adjusted index, measuring actual shipments, jumped 10.9% to 123.8 in August, reversing a month-to-month decline of 9% that was reported in July.

In addition, ATA revised the month-to-month decline for July that was announced on Aug. 23. The revised decline was 0.8%, rather than the 1.3% that was announced earlier.

While tonnage isn’t growing fast, Costello and Albrecht observed that anecdotal reports from freight carriers indicate they are handling as much freight as they can.

“In part, this is due to less industry supply,” Costello said. “The number of trucks operated by the truckload industry is still down about 12% from the height in late 2006, yet tonnage levels are about the same as in late 2006. Most carriers are finding it very difficult to hire new truck drivers, which mean they can’t add too many trucks.”

“Capacity is fairly tight, despite modest or even mediocre volumes in numerous sectors,” Albrecht said.