We have mostly positive news this week, as the latest trucking economic data points to improving for-hire freight, and a market that is slowly returning to balance.
But the spot market remains a challenging place to do business, with rates reaching their lowest levels since summer of 2020.
Truck tonnage improves
U.S. for-hire truck tonnage grew 1.8% in August, according to the latest data from the American Trucking Associations (ATA).
“August tonnage levels rose to the highest level since February 2023,” said ATA chief economist Bob Costello. “Not only does the latest robust gain show freight levels are coming off the bottom, but so does the sequential pattern over the last eight months. Starting earlier this year, every time tonnage falls, it is higher than the previous low. For me, this month-to-month pattern is more important than looking at the year-over-year per cent changes since we are at an inflection point in the freight market.”
The tonnage index was 0.7% stronger than the same month last year, just the second YoY gain in the past 18 months.
Trucking condition improvements ahead: FTR
FTR’s Trucking Conditions Index (TCI) slid in July to a -5.59 reading from a rare positive posting of 0.95 the prior month, but the industry forecaster is predicting stronger readings ahead.
“Carriers surely are tired of the ‘prosperity is just around the corner’ message, but the freight market distortions of the past four years still are resolving,” explained FTR’s vice-president of trucking, Avery Vise.
“Although the latest employment data suggests that larger trucking operations have largely rightsized, the market still has far more very small carriers than it did before the pandemic. Our data indicates that a recovery in freight volume and utilization is already underway but is frustratingly gradual for carriers. While the Federal Reserve’s easing of interest rates certainly will help, the effects will not be instantaneous.”
Balance returning to freight markets: ACT Research
More reason for optimism comes from ACT Research’s latest For-Hire Trucking Index, which showed a rise in volumes coupled with a decrease in trucking capacity. But it also noted private fleets continue to grow.
“The improvement reflects both growing goods demand and inventory pre-positioning,” Carter Vieth, research associate at ACT Research said of the improving Volume Index. “Consumption of durable goods rose 4.2% quarter over quarter [seasonally adjusted] in Q2, imports and inventories are growing, and cross-border shipments are increasing. Though, pre-positioning ahead of potential East Coast port strikes is part of the story.”
ACT’s Capacity Index shrunk by 1.1 points.
“This month’s reading marks the 14th month in a row capacity has declined, the longest streak since the inception of the survey in late 2009,” Vieth said. “Private fleet capacity additions have continued, which is keeping pressure on for-hire fleet capacity in recent months, but overall, the supply-demand between fleets and capacity looks set to gradually begin to rebalance. As for-hire conditions have yet to pick up much, it’s hard to see capacity turning positive in the coming months, especially as for-hire fleet purchasing intentions remain under pressure.”
The Supply Demand Balance improved to 56.9 thanks to the combination of higher volumes and reduced capacity.
In its Freight Forecast: Rate and Volume Outlook report, ACT reiterated that private fleet growth and insourcing is slowing the for-hire segment’s recovery. However, Tim Denoyer, ACT’s vice-president and senior analyst added: “Freight demand continues to grow broadly, through private fleets are handling the growth and insourcing. While general merchandise retail trends are positive enough to suggest a decent peak season for freight volumes overall, some sectors are struggling, so spot conditions are unlikely to improve much.”
Spot market remains challenged
DAT Freight & Analytics noted truckload spot market freight volumes continued to rise in August while rates fell for the third straight month.
DAT’s Truckload Volume Index recorded a 2.8% gain for the van segment in August, while the refrigerated segment saw a volume increase of 4.3%, and flatbed 0.3%. Van and reefer volume indices were stronger than last August.
But rates remained under pressure, with spot van rates down 5 cents/mile compared to July, reefer sliding 4 cents/mile and flatbed 7 cents.
“Linehaul rates were year-over-year positive for the first time since March 2022, a trend that should continue into the fall shipping season,” said Ken Adamo, DAT chief of analytics. “However, year-over-year comparisons are little consolation for truckers looking for better pricing now.”
Contract rates also slid in August, down 3 cents/mile (van), 7 cents/mile (reefer) and 3 cents (flatbed) compared to July levels.
Latest week was a stinker
Truckstop and FTR, for their part, reported that spot rates for the week ended Sept. 20 reached their lowest level since June 2020.
“One bright spot for carriers operating in the spot market has been the steady decrease in diesel prices,” the companies reported. “The all-in broker-posted rate has been predominantly negative year over year since April 2022. However, excluding fuel costs (as estimated by a hypothetical fuel surcharge), spot rates have been positive year over year for the past 10 weeks.”
Those YoY comparisons are against a summer surge in fuel prices last year that ended in mid-September. The companies also noted that a pullback in rates is normal for that particular week and is usually followed by a bounce for the week ending Sept. 27.
The Market Demand Index, which takes into account truck and load postings, dropped to 58.4, its lowest level in three weeks.
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