In macroeconomic analysis, the freight industry often serves as a barometer of economic activity. The movement of goods reflects the health of production, consumption, and trade. When freight volumes decline, it typically signals an economic slowdown or recession. The Bank of America Freight Payment Index is one such tool that tracks changes in freight volumes and expenditures, providing economists and investors with a timely indicator of economic health.
Definition and Composition
The Bank of America Freight Payment Index is a comprehensive measure of U.S. freight activity, based on actual freight payment data processed by Bank of America. It covers national and regional freight volumes and expenditures, with seasonal and calendar adjustments to eliminate fluctuations and provide a clearer picture of actual changes in freight activity.
The index consists of two primary components:
- National Freight Volume Index: Measures changes in freight volumes nationwide, typically calculated in ton-miles or freight units.
- National Freight Expenditure Index: Tracks changes in total freight expenditures, including transportation costs, fuel surcharges, and related fees.
Historical Data and Methodology
With historical data dating back to 2010 (baseline = 100), the index compares quarterly changes in freight activity. The data comes from Bank of America's freight payment division, which processes over $28.8 billion in global freight payments annually for corporate and federal government clients.
The calculation process involves:
- Data collection from actual freight payments
- Data cleansing to remove outliers and errors
- Seasonal adjustment using X-12-ARIMA or TRAMO/SEATS methods
- Calendar adjustment to account for varying month lengths and holidays
- Index calculation using chained index methodology
Applications and Insights
The index serves multiple purposes:
- Economic forecasting: Declining freight volumes and expenditures often precede economic downturns.
- Industry analysis: Provides insights into freight volume, pricing, and profitability trends.
- Business strategy: Helps carriers adjust operations and optimize routes.
- Policy making: Assists government agencies in monitoring economic conditions.
Q2 2020 Analysis: Pandemic Impact
The second quarter of 2020 revealed stark pandemic effects:
- National Freight Volume Index: 114.9 (down 7.6% quarterly, 12.5% annually)
- National Freight Expenditure Index: 162.3 (down 13.7% quarterly, 19.4% annually)
Regional variations emerged, with Northeast and Southeast regions experiencing the steepest declines, while the Southwest saw modest quarterly growth (though still negative annually). This reflected differing regional economic structures and pandemic impacts.
Expert Perspectives
Bob Costello , ATA Chief Economist and report author, noted:
"Q2 saw widespread lockdowns depressing both volumes and expenditures. While spot market rates showed some recovery, contract pricing lagged. The 15.7% drop in diesel prices further reduced fuel surcharges. The automotive sector suffered disproportionately compared to e-commerce and construction."
Bobby Holland , Bank of America's Freight Data Solutions Director, added:
"Consumer confidence recovery will take time, and 'reopening' definitions remain unclear. Supply chains face continued pressure, with potential second-wave disruptions. Comprehensive analysis is needed to fully understand the pandemic's freight implications."
Future Outlook and Strategic Recommendations
Key factors influencing freight industry recovery include:
- Pandemic duration and severity
- Economic recovery trajectory
- Policy support measures
- Technological advancements (autonomous vehicles, IoT, big data)
- Sustainability initiatives
For freight companies navigating uncertainty, strategic priorities include:
- Accelerating digital transformation
- Diversifying service offerings
- Enhancing risk management frameworks
- Investing in sustainable technologies
- Upskilling workforce capabilities
- Strengthening collaborative partnerships
Conclusion
The Bank of America Freight Payment Index provides critical insights into U.S. economic health through freight activity monitoring. The Q2 2020 data underscored the pandemic's severe economic disruption, with freight metrics serving as leading indicators. As the industry adapts to post-pandemic realities, proactive strategies around technology, sustainability, and collaboration will determine competitive positioning in the evolving logistics landscape.
Terminology Note: TL (Truckload) refers to dedicated shipments for single shippers, while LTL (Less-Than-Truckload) combines multiple shippers' cargo. Seasonal and calendar adjustments remove periodic fluctuations, while chained indexing connects quarterly comparisons.