We get mixed messages from the latest economic data, with truck tonnage improving but trucking conditions weakening.
The spot market is struggling to sustain any strength, but a recent survey shows small carriers and owner-operators are becoming more optimistic. The same can’t be said of trailer manufacturers, who are seeing weak orders as they open their 2025 order boards.
Truck tonnage continues to improve
U.S. for-hire truck tonnage rose modestly in October, the American Trucking Associations (ATA) reports.
“The slow, and choppy, climb off of the bottom continued in October,” said ATA chief economist Bob Costello. “Since hitting a low in January of this year, tonnage is up a total of 3%, plus the index is up sequentially in three of the last four months. No doubt the freight market has improved – albeit slowly – over the course of the year.”
FTR’s Trucking Conditions Index pulls back
Trucking conditions weakened in September from -1.39 in August to -2.47, according to FTR’s Trucking Conditions Index (TCI).
Blame weakness in freight rates, utilization and volume, partially offset by lower fuel costs. Since April 2022, the TCI has only seen positive territory in two months – May and June of this year. However, FTR is projecting consistently positive readings through at least a two-year horizon.
“Aside from a near-term boost mostly related to falling diesel prices, we have not changed our Trucking Conditions Index forecast significantly in the wake of the election,” said Avery Vise, FTR’s vice-president, trucking.
“The outlook continues to be more favorable for carriers than what they have experienced for well over two years. Our analysis indicates gradual but steadily rising capacity utilization leading to stronger freight rates in 2025. Just like everyone else, we’ll be watching closely to see exactly what trade and other economic policies are implemented and over what time frame. Some freight disruptions are likely due to tariffs and other factors, but it is not yet clear that those actions will do more than shift the timing of activity.”
Little appetite for new trailers
Trailer orders jumped 34% in October from September levels but were down 55% year over year, according to FTR. This marked the lowest October total since 2013.
“With the launch of the 2025 order season, North American Class 8 net orders increased 6% year over year in September-October 2024 while U.S. trailer net orders dropped by 58% year over year during the same period,” said Dan Moyer, FTR’s senior analyst, commercial vehicles.
“The steep decline in trailer demand is largely due to fleets prioritizing investments in new power units over trailers, likely influenced by reduced profitability or shifts in trade cycles. Some fleets might also have been postponing trailer orders until after the November elections or in hopes of lower trailer prices. Slightly elevated trailer inventories, reduced fleet spending, and shrinking backlogs are expected to pressure trailer production levels through the rest of 2024. If 2025 trailer orders fail to rebound soon, some OEMs may need to extend or deepen production cuts into next year.”
ACT Research reported orders of 16,900 units, down 52% year over year.
“Since we’re still in the early stages of the traditional start to the order season, this month’s uptick was expected. It’s also no surprise that the data is significantly below the October 2023 intake, given the soft demand recorded throughout this year,” said Jennifer McNealy, director of commercial vehicle market research and publications at ACT Research.
Year-to-date orders are down 37.5% compared to the first 10 months of 2023, she added.
“Industry anecdotes suggest that the lack of optimism continues, based on lower backlogs than we’ve seen in a decade. Despite positive momentum in the U.S. economy, lingering weak carrier profitability suggests little support for trailer orders heading into 2025,” McNealy concluded.
Spot market struggles to sustain strength
Spot market rates for the week ended Nov. 15 revealed a still-struggling market.
Rates for dry vans and flatbed equipment declined on the week, according to Truckstop and FTR Transportation Intelligence, while reefer rates saw slight growth. Rates in all three segments lacked the usual trajectory for that week of the year, Truckstop announced.
Truck postings ticked upward slightly, bringing the Market Demand Index to 58.6, its lowest level in weight weeks.
Carrier outlook improving
The mood among owner-operators and small fleets is improving, according to a recent survey by Bloomberg and Truckstop.
“Despite greater optimism over the outlook, more carriers expressed an intent to leave the business than in our prior survey,” said Lee Klaskow, senior freight transportation and logistics analyst at Bloomberg Intelligence. “An acceleration in carrier exits could speed up the market’s return to equilibrium and provide a better backdrop for rates next year.”
Highlights of the survey show:
Rates may bounce back soon: Spot rates remained suppressed in Q3, falling 17% on average excluding fuel, according to respondents, but more see the view brightening. An increase over the next three to six months was expected by 29% of carriers, 6% points higher than the survey three months ago. There are indications that the market is moving closer to equilibrium. Truckstop’s Market Demand Index for the North American trucking market increased 13% on average in Q3 from last year, the third consecutive quarter of year-over-year gains.
Demand may gradually increase: Sentiment going forward appears to be more optimistic, even though carriers continued to see lower volume in Q3, with 56% of respondents noting weaker demand compared with last year. Higher volume over the next three to six months is expected by 40%, 7% better than the 2Q survey. An improved demand outlook could also lead to more carriers buying equipment, with 24% saying they might make a purchase in the next three to six months.
Carriers face uncertainty about their futures: More carriers see themselves exiting the industry, with 15% saying they believe they’ll be out of trucking in six months, 6% higher than the 2Q survey. Excess capacity has been slow to leave the market, and any acceleration could help spot rates move higher, setting up for a better 2025.
“Carriers are optimistic that the toughest times are now behind them,” said Kendra Tucker, chief executive officer, Truckstop.
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