The freight market continues to be characterized by overcapacity, and with private fleets engaging in spot activity more than in past cycles, spot rates remain only slightly above the late-2023 lows, according to the latest release of the freight & transportation forecast.
“Class 8 tractor backlogs are thinning, but retail sales remain above replacement, more than two years after the spot market turned down. This fits the definition of a prebuy to a tee,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst.
He added, “Through mid-July, rates have exceeded seasonal patterns by about four cents, mostly a temporary boost from Beryl, which hit during a seasonally soft period for the truckload spot market. Storms during stronger seasonality may have a larger impact on rates.”
Denoyer concluded, “Freight market conditions are usually soft in early July, but DAT’s load/truck ratio rose meaningfully in the days following Beryl and have remained stronger than normal seasonality since. Of course, the surge will likely be short-lived. But in our view, a seasonally adjusted DAT load/truck ratio at 7 signals a market closing in on balance, if still not quite there yet. We need to see this measure at an 8 or 9 to push rates up much.”
The DAT load/truck ratio isn’t exactly a scale of 1 to 10. It can go way past 11. It reached the mid-teens in 2017 and early 2018 and the high teens during 2021, peaking above 20.
Freight Forecast Report Overview
The monthly 58-page ACT freight forecast provides analysis and forecasts for a broad range of U.S. freight measures, including the Cass Freight Index, Cass Truckload Linehaul Index, and DAT spot and contract rates by trailer type. The service provides monthly, quarterly, and annual predictions for the TL, LTL, and intermodal markets over a two- to three-year time horizon, including capacity, volumes, and rates. The Freight Forecast provides unmatched detail on the freight rate outlook, helping companies across the supply chain plan with greater visibility and less uncertainty.
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ACT Research is recognized as the leading publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasts for the North America and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies. ACT Research is a contributor to the Blue Chip Economic Indicators and a member of the Wall Street Journal Economic Forecast Panel. ACT Research executives have received peer recognition, including election to the Board of Directors of the National Association for Business Economics, appointment as Consulting Economist to the National Private Truck Council, and the Lawrence R. Klein Award for Blue Chip Economic Indicators’ Most Accurate Economic Forecast over a four-year period. ACT Research senior staff members have earned accolades including Chicago Federal Reserve Automotive Outlook Symposium Best Overall Forecast, Wall Street Journal Top Economic Outlook, and USA Today Top 10 Economic Forecasters. More information can be found at www.actresearch.net.
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Slowing US Class 8 tractor fleet growth, while roughly a year later than price signals suggested, will help move the cycle forward, and how quickly it affects rates will depend mainly on freight demand and fleet productivity, according to the latest release of the freight & transportation forecast.
“Goldilocks economic conditions of strong growth and disinflation are largely holding, and a rising tide should eventually lift all boats, but at the moment, the freight growth being generated by the economy is being handled by private fleets and railroads,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst. “Private fleets have added more than the industry’s net capacity growth in the past year as the for-hire sector has contracted. The productivity of this new capacity is now being tested. Most private fleet operations are one-way, and though some are adept at filling backhauls in the for-hire market, most are not.”
He continued, “To the extend private fleets are successful filling backhauls, it is further delaying the for-hire rate recovery, and this is likely a factor in lingering spot market softness. Backhauls are not mission critical for private fleets, and as a result, the lower productivity of this equipment as seasonal volumes pick up should support higher spot volumes.”
Denoyer concluded, “Spot rates moved up a bit more than normal during Roadcheck this year, but except for two days last week, spot rates remain below year-ago levels. The load/truck ratio is now up y/y, and the trend of the past six months has improved as capacity has contracted. And even as private fleet capacity has come in more recently, spot volumes are starting to pick up. While we don’t see a tight market, these tighter dynamics suggest further increases in spot rates.”
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