The latest reports indicate a slow but steady improvement in the freight market. Although March saw little change in current freight conditions, shipment numbers and rates continued to stabilize.
According to Cass Information Systems, a key indicator of U.S. freight spending surged by 38% in 2021 and another 23% in 2022. However, it then reversed, dropping by 19% in 2023, and is expected to fall by another 14% in the first half of 2024. The March Cass Freight Index for Shipments fell by 0.2% compared to February's index (2.3% when adjusted for seasonality). Simultaneously, the Cass Freight Index for Expenditures rose by 0.1% over February but remained down by 18.5% from March 2023. The Cass indexes cover various modes of transportation, including truck, rail, ship, air, and pipeline, with about 75% of the information derived from truck shipments.
The collapse of the Francis Scott Key Bridge in Baltimore on March 26 won’t significantly affect total freight statistics as container shipping is diverted to other East Coast ports. However, much of Baltimore’s shipping involves "roll-on/roll-off" operations for vehicles and machinery, resulting in a greater need for flatbed trucks to move these products, consequently resulting in higher spot rates. While crews are actively working to open freight channels to Baltimore ports, predictions suggest that the port will remain closed to container traffic until at least May. Rebuilding the bridge itself will be a lengthy process taking years. Some container traffic might divert to the Norfolk, Virginia, port, or possibly the port in Wilmington, Delaware. Other East Coast ports are also viable alternatives. Anticipate rate increases for container and warehouse pickups.
An early April release from FTR Intel highlighted that the Institute for Supply Management’s Manufacturing Index recorded a positive number for the first time in 17 months. The uptick in manufacturing is a positive indicator for freight markets as manufacturers seek to ship their products. Imports also contributed to the numbers, with March imports showing strength. Employment numbers were also robust in March, indicating that employers are increasing staff, which is another positive factor for trucking.
Motive’s Monthly Economic Report for April started with the revelation that new carrier registrations surged while revocations slowed, indicating an expansion in trucking capacity. The report asserts that gains in retail demand and increased consumer confidence are helping to decelerate the contraction in the trucking industry. Motive has been forecasting that the freight market will become "more carrier-friendly" by the second half of the year.
The core issue here is capacity. Ordinarily, the number of trucks available for hauling freight grows with demand. When truckers can turn a profit, more trucks are put into service. However, the primary reason for the continued low rates is simply the surplus of trucks. The slowing of the contraction in the trucking industry is positive news — but only if the trend doesn’t reverse too quickly to allow rates to rise.
A pivotal point highlighted in the Motive report is the number of trucks visiting warehouses of the Top 50 U.S. retailers, as tracked by GPS data. The more truck visits, the more freight is moving. Motive reports that visits to those retailers in March 2024 jumped 3.9% from February and 3.9% over March 2023 numbers. Department stores, electronics retailers, and clothiers saw an 18.2% increase in visits from March a year ago. The most significant increase was in home improvement centers, which went up 20.5%. If customers are engaging in home improvements and purchasing new appliances, the benefit to the trucking industry will be substantial.
Motive predicts that increased warehouse visits will continue, with 2024 ending 25-30% higher than 2023. The company forecasts that spot rates will improve later in the year, and increased consumer demand will persist.
This month, the U.S. Energy Information Administration (EIA) issued its Short-Term Energy Outlook. The EIA, the statistical and analytical agency within the U.S. Department of Energy, forecasts that Brent crude oil prices will rise from last year’s $82 per barrel to $89 this year, primarily due to increased global consumption. Barrel prices are anticipated to decrease by $2 for 2025. While no one desires an increase, the predicted amount indicates stability in the market. If prices for diesel fuel remain relatively stable, trucking businesses can more accurately anticipate their fuel costs, even if those numbers haven’t returned to the lower levels of previous years.
The EIA anticipates hotter summer temperatures and an increased demand for electricity. This is troubling news for carriers investing in electric vehicles, particularly in areas where the grid isn’t equipped to handle extra charging stations. Oil prices are highly susceptible to world events, and tensions in the Middle East can still have an impact. Weather events can also influence crude oil prices. While the EIA forecasts stability, it’s important to remember that such predictions do not account for possible catastrophic events.
Lastly, DAT Freight and Analytics reported that spot rates for both dry van and refrigerated freight are down from the March average, while flatbed rates have increased slightly. With summer approaching, building activity is expected to rise, and rates should increase with the heightened freight levels. Analysts still predict that 2024 will witness the trucking market emerge from the freight recession it has endured for more than a year now — but that recovery won’t be rapid.
