Freight demand is stronger than previously believed. It just hasn’t reached all trucking markets yet.
The OOIDA Foundation’s July freight market update said a growing economic reliance on artificial intelligence could be a cause for concern.
Wholesale trade and manufacturing sectors increased unexpectedly, but the dependence on the physical buildout of AI could end any freight recovery if there’s a significant downturn in capital expenditure, the Foundation said.
Increased fuel costs, conflict in the Middle East and inflation continue to cloud the outlook of the freight market.
Van market
The South Central and Southeast regions were best for carriers in terms of demand, while the Midwest was the only region to report a decline.
Spot rates stayed above the three-year moving average for the eighth consecutive month.
Interest rate hikes and any downturn in the AI buildout could negatively affect rates.
Food manufacturing, miscellaneous durable goods wholesalers, electrical and electronic goods wholesalers and furniture and home furnishing goods wholesalers were drivers of van market success.
Flatbed market
Lower demand was reported in five of six regions, with the lone increase reported in the West Coast region. Demand was most favorable in the Southeast and South Central regions.
The West Coast also saw the largest rate increase. The largest decline was in the Mountain Central region.
Cement and concrete product manufacturing, mining and oil and gas field machinery manufacturing and farm and machinery equipment manufacturing all declined.
Reefer market
All but two regions reported increased demand, the largest in the Northeast.
“While the current upcycle continues, it’s important to understand what’s driving it: tighter capacity, not stronger demand overall,” the Foundation said. “This isn’t what we would expect in a traditional recovery.”
A decline in the composite index was due to a contraction in food manufacturing and a reduction in grocery and related product goods wholesalers.
Trucking market
The Cass Shipment Index fell in June and is down year over year. The Truckload Linehaul Index was down for the second time in 11 months.
“The volume recovery seems delayed by a hopefully brief bout of inflation, and it will take time for the razor thin U.S. savings rate to recover,” Cass said. “While volumes still don’t look great, the industry is entering the sweet spot of the cycle, with rates rising, industry earnings starting to improve, and volume growth on the way. ”
Transportation and warehouse business applications rose for the third consecutive month.
However, the employer-firm signal remains weak. This suggests recent growth is likely coming from smaller businesses.
“While geopolitical tensions appeared to be easing in June, recent developments in the Strait of Hormuz could create renewed cost headwinds for truckers,” the Foundation said. “The concern is not just crude oil prices, but also refining costs. Diesel costs could face additional upward pressure.”
Used truck sales were above historic averages, with demand stronger than pricing suggests.
Freight market
U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace than the previous month.
The Housing Market Index fell for the first time in three months. More builders cut prices this month and sales incentives usage remained above 60%.
Intermodal continues to trend above historic levels due to cost pressures associated with fuel and the truckload market, not a surge in freight, according to C.H. Robinson. LL
More Land Line business news.
Credit: Source link
