CNBC reported on new data presented by Cass Freight Index showing that recent inflation indicators are a sign that freight rates have peaked. According to the July Cass Freight report, U.S. freight rates increased 28% year over year but fell nearly 2% month over month in July, indicating that the U.S. market has reached peak freight rates just as peak shipping season encompassing both back-to-school and the holidays begins. Cass Index Report Author and ACT Research Sr. Analyst Tim Denoyer told CNBC “We’re coming into this peak season with much more free capacity. I think that’s going to be a good thing from a cost perspective for those big retailers who have been struggling with a lot of cost inflation.”
This report came at a time when major retailers are set to report their earnings this week. Walmart and Target have mentioned the need to change inventory as a result of shifting consumer spending patterns and inflationary pressures. The Cass Freight report comes on the heels of better-than-expected inflation reports the week before, which point to a possible downturn in inflation. The SPDR S&P Retail ETF has gained nearly 12% in August compared to a 4% move higher for the S&P 500.
CNBC also reported, “shipments, freight moved by companies, increased by 0.4% year over year, according to the report, but declined nearly 2% month over month. The market balance has really shifted. It’s steady on the demand perspective, but supply has grown.”
Despite flattening shipment trends, demand remains high over pre-pandemic levels, and U.S. logistics companies, particularly trucking companies, should keep enjoying strong pricing power. “The Covid crisis led many independent truckers to leave the industry, and in 2021, the American Trucking Association released a report finding the nation’s trucker shortage reached a record 80,000.” The report also revealed that 1,000,000 new truckers would be needed to maintain the current levels in the trucking industry. Trucking stocks have benefitted from the pricing power and steady demand.