Freight rates experienced a slump in February, but the latest release of ACT Research’s For-Hire Trucking Index suggests that this downward trend has nearly reached its finale.
ACT Research’s recent market analysis revealed encouraging signs for the rate trends in freight volumes, with capacity growth beginning to slow this month. This could be an indication that a recovery may soon occur as fleets start feeling positive impacts from more relaxed conditions of the market.
ACT’s Trucking Volume Index has been in a downward trend for the majority of the past eleven months, with February falling below 50 – considered contractionary territory. Despite an uncertain economic climate, truck volumes remain soft but mixed signals point to hopefulness amongst industry professionals and analysts alike.
“The soft freight market persists as inflation continues to impact consumers’ purchasing power, and recent bank failures and job cuts make recession more likely,” said Tim Denoyer, vice president and senior analyst at ACT Research.
February saw a major drop in ACT Research’s Pricing Index, with the index plunging to an all-time low of 39.3 – its fourth time ever falling into 30s territory and 6.3 points down from January’s 45.6 reading.
“The cure for low prices is low prices, and we currently estimate spot rates are 16% below fleet operating costs, which should expedite this bottoming process,” Denoyer added. “Even as freight demand fundamentals will likely remain soft, seasonal increases in TL volumes as capacity slows and eventually tightens will build the bottom of the spot rate cycle in the next couple of months.”
Despite a slight dip in the Capacity Index for February, ACT reported signs of stabilization as fleets have adapted to softened market conditions by shifting towards larger, better-financed enterprises. This is indicative of an economic bottoming process and suggests that capacity has seen improvement over the past year due to supply chain upgrades and influxes.
After a revitalizing January, the Supply-Demand Balance of ACT’s measure moved looser in February with month-over-month declines in both volumes and capacity.
“The trucking market has been loose for a full year based on this series,” Denoyer concluded. “Though the loose environment is expected to persist in the near term, we expect less loosening from here.”
Source: Overdrive
