Freight demand is nearing an upturn as growing goods spending, a turning inventory cycle, and rising industrial production will add to freight demand this year. After a two-year downturn, the upturn is likely within a couple of months, according to the latest release of the freight & transportation forecast.
“We’re frequently asked who’s buying all these trucks with spot rates at sharp operating loss levels and carrier margins under severe pressure. In our view, private fleets who operate vehicles on longer trade cycles are likely planning for the 2027 emissions regulations, which may drive record demand for new commercial vehicles in the next few years,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst.
“For the past year, cost economics have taken a back seat to supply chain resilience and planning for upcoming climate rules, as we see it, supporting new truck demand and pressuring freight rates. But this is changing in 2024 as order intake has softened and private fleets join for-hire fleets in reconsidering costly capacity additions. We think a lower Class 8 tractor supply dynamic will be very helpful in bringing freight back to the for-hire market.”
“With some help from rising used tractor exports to Mexico, we estimate the Class 8 tractor fleet is nearly finished growing for a while. Since the start of the pandemic, the fleet has grown 12%, but our Freight Composite, which measures the freight economy in real GDP terms, has grown even more. Large capacity additions of the past two years were a primary factor driving rates down, and we think the slight closing of the equipment supply spigot in a growing economy will help shake the truckload market out of the doldrums,” Denoyer concluded.
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.
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.
Additional Resources
While trucking demand remains soft overall, rising imports and intermodal trends are key leading indicators of a recovery in trucking this year, according to the latest release of the freight & transportation forecast. Recovering goods demand, inventories, and global ocean shipping disruptions will likely add to US freight movements in 2024 as shippers seek to buffer safety stocks.
“The January surge in rates following the extreme cold mostly reversed quickly as temperatures rose into seasonal market softness, but in late February, seasonally adjusted spot rates were still at six-month highs, excluding the cold snap,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst. “With January freight volumes slowed by weather, we see signs the next few seasonally soft months could turn above trend as shippers work to make up lost volumes. The truckload CEOs we interviewed at ACT’s seminar on February 21 are seeing volumes improve enough to get more selective on freight mix, but this demand is not finding its way into the spot market yet.”
The leading indicators of a change in the cycle’s trajectory include strong intermodal and import trends, which suggest the inventory cycle is turning. However, the freight market remains loose, and while the cold was impactful, it was brief. We think the improvement in driver availability at the medium and large fleets in ACT’s for-hire survey was partly due to further exodus of owner-operator capacity.
“For-hire capacity continues to tighten at the margin and fleet capex budgets are sharply lower for 2024. There are certainly pockets of strength, such as in LTL, where capacity additions are likely, but the message of capital discipline from the industry suggests tighter supply this year, as demand begins to recover. The modal mix shifts in the Cass data suggest the cycle is through the worst, but not out of the woods quite yet,” Denoyer concluded.
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