Freight Calibration: What the Data Revealed and What It Means for Trucking

At the heart of FTR’s uniquely comprehensive trucking dataset is an annual data collection process covering all of the goods-producing sectors in our economy. We learned decades ago that the readily available quarterly or monthly trucking data covers only a fraction of the real freight. FTR solves this problem by using the core production data for the major commodities, data that is only available on an annual basis. We are able to translate that data into freight movements, thereby getting full coverage of the freight market.

Quarterly translation
One challenge we face in doing this work is the conversion of the annual data into quarterly data. We report on that process in this month’s commentary because of an error we had discovered. We informed you of part of this error when the full annual update was completed in January and have now completed our work in this regard. Normally the annual to quarterly translation process is a simple one. It gets more difficult when the market produces large year to year variation. Here is what we have learned about the 2009 and 2010 data, a pair of years with very large economic variation:

• Originally, we discovered that our existing calculation method put too much change in the first quarter of each year. This is what we reported back in the January report.
• Those same calculation methods failed under the pressure of this big change, resulting in our under reporting freight in 2009 and over reporting freight in 2010.

The results
Accordingly, our freight research team has fashioned a new calculation method that solves both problems.  The results are in this month’s reports and databases.  It has these three important results:

• The market shrinkage from the recent recession was less than previously thought. In annual terms 2009 shows a major difference:  -11.3% rather than -15.5%. We also know that the peak to trough drop has decreased from 26% to 21%. Offsetting those changes are our revised numbers for 2010 and 2011, growth is now shown to be +3.3% and +3.5%, respectively, rather than the much more dramatic +11.3% and +1.8%. One item to note is that this change has not significantly altered our current levels of freight demand – our 2011 freight volume is nearly unchanged from the prior month (a difference of only 0.5%).
• The second effect is one of timing and individual quarterly changes. The new data moves the peak and trough quarters from the last recession three quarters later. The severity issue is important because dramatic quarterly changes are what cause driver shortages. This recalibration reduces the peak expansion quarter for this recovery from an annualized rate of 27% to 18% plus the substitution of one dramatic quarter for three.  That means a reduction in truck shortages from the 200,000 level to 150,000. The new level is still sufficient to maintain solid pricing, but it does reduce the chances of a true crisis when Hours-of-Service rules cut in.
• Finally, the recalibration changes our understanding of the comparison for this recovery to the last. The new numbers for the 2004 recovery move the expansion from the first quarter to an even spread across quarters two, three and four. Importantly, the magnitude of the change is still enough to create the same level of shortage as we thought before, but pushes the crisis out to the second half of 2004 rather than the first half. This trues up with what we know about pricing. As we stated above, the changes reduce the peak shortage in the current recovery. That is important because the peak period of stress will be at least twice as long as in 2004. Without the reduction in level the chances for supply chain failures would be very real indeed.

Committed to excellence
We hope this commentary helps you understand how and why our freight numbers have changed.   You will continue to see such changes in FTR’s numbers periodically because we are committed to continually improving our methods and to immediately and openly fixing any problems. It follows that we are also committed to explaining those changes when they occur.

-Stay well

Do you have questions about how we derive our industry-exclusive data? Feel free to contact me with your thoughts and questions at jstarks@truckgauge.com.