According to ACT Research, the recent supply and demand dynamics of the freight market are showing signs of recovery. Their findings suggest that improving demand and tightening capacity may indicate the industry is on the path towards overcoming the current freight cycle.
“After a long soft patch, we see the U.S. freight transportation industry on the verge of a new cycle as we begin to transition from the bottoming phase into the early phase of the freight cycle in the months to come,” Tim Denoyer, ACT Research’s vice president and senior analyst, said in the Cass Transportation Index Report April 2023.
Findings from the ACT Freight Forecast report indicate that the freight cycle remains weak and truckload spot rates are approaching their lowest point.
Truckload Volume Index
DAT Freight & Analytics reported that in April the Truckload Volume Index saw a continued decline in freight volumes, leading to a drop in national average spot rates for dry van and refrigerated loads for the fourth month in a row.
- Van TVI was 206, down 15.5% from March and 12.3% lower year over year
- Reefer TVI fell to 154, a 16.3% decline from March and 12.5% lower year over year
- Flatbed TVI was 239, 13.7% lower compared to March but 3.5% higher year over year
The latest report from DAT brings news of a downturn in demand for truckload capacity in the spot market. This means that national average load-to-truck ratios have decreased
- Van ratio: 1.9, down from 2.0 in March, and 3.4 in April 2022
- Reefer ratio: 2.7, down from 3.0 in March and 6.3 year over year
- Flatbed ratio: 12.1, down from 12.1 in March and 64.5 year over year
Lower demand for truckload services resulted in a decline in national average spot van and reefer rates, as reported by DAT.
- The spot van rate averaged $2.06 per mile, down 10 cents compared to March and 71 cents lower year over year
- The spot reefer rate fell 9 cents to $2.41 a mile, 72 cents lower than in April 2022
- The spot flatbed rate dipped 4 cents to $2.67 a mile, down 70 cents year over year
Cass Freight Index
Findings from the Cass Freight Index reveal a dip of 2.4% in shipments for April 2021 compared to last year. The data is a comprehensive representation of all modes of domestic shipping and is derived from over 36 million invoices and $44 billion in spend processed annually on behalf of hundreds of large shippers. Cass confirms that the diversity and aggregate volume of shippers provide a valid statistical representation of North American shipping activity.
The report suggests that warm weather earlier in the year led to some freight being shipped in January and February instead of March and April. After seasonal adjustments, the index decreased by 1.3% from March to April, following a 3.8% decrease in March.
“With produce season arriving late this year and the freight market likely passing the peak of the destock, freight demand is near the bottom,” said Denoyer. “With inflation easing, improving real income trends will allow for a bit more holiday spending this year, when even less destocking will mean more freight volume.”
Fleet Capacity
Get ready for tighter capacity in the trucking industry as interstate operating authorities have been revoking contracts at a record pace, with over 11,000 net revocations since last October and 1,600 net revocations in April alone. Although total revocations are at near-record levels, grants and reinstatements are also on the rise. This tightening capacity will lead to an increase in spot rates.
Long-distance trucking employment has decreased by 8,700 jobs in the first quarter, marking a 1.0% decrease. However, driver employment numbers remained up 3.0% year over year in the latest March data point. According to Denoyer, long-haul jobs are set to decline even further this year as trends in employment follow trends in freight rates.
Denoyer stated, “The intersection of additional volume and tightening capacity underpins our forecast for a near-term bottom in spot truckload rates. We’ve been expecting the bottom roughly around this month since we introduced 2023 spot rate forecasts 16 months ago, and we still think RoadCheck will help usher in a new freight cycle.”
Source: Truckinginfo
