The US trucking industry experienced the late-cycle phase of the classic truckload cycle in 2022, leading us into the bottoming phase in early 2023. In May 2024, the rebalancing process continues slowly, though progress has been made.
How confident should your business be in ACT's forecasting for 2024?
For 2023, ACT's forecasts for the shipments component of the Cass Freight Index® were 96.9% accurate on average for the 24-month forecast period.
ACT Research’s 2023 forecasts for the Cass Truckload Linehaul Index® were 96.6% accurate on average over the past 24 months, and 98.5% accurate over the past 12 months.
Trucking Industry Trends
Roadcheck Finds Truckload Market Near Equilibrium
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.
For-Hire Recovery Stalled by Private Fleet Productivity
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.
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. 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.
To the extent 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.
Freight Volumes in 2024
While for-hire volumes remain broadly soft, the rising GDP-based ACT Freight Composite, alongside slowing capacity additions, gives us reason to think volumes will improve as private fleets reach productivity limits. Inflation remains a risk, but retail sales in real terms remain positive and were up 3.0% y/y in March. Improved imports and intermodal volumes also bode well for improvement.
Freight Rates in 2024
The market has favored shippers, as capacity additions by private fleets last year weighed on for-hire fleets, but most recent Class 8 tractor order and sales data show a decline in equipment additions, a requisite for rates to improve meaningfully. Though fleet capacity growth has delayed the recovery in rates, the improving supply/demand balance suggests the worst is in the rearview, and the cyclical recovery should continue.
Fleet Capacity in 2024
The decrease in ACT's For-Hire Trucking Capacity Index continues to reflect challenging for-hire conditions, with low rates and higher costs driving fleet contraction, as evidenced by the worst quarter for profitability amongst the publicly traded TL carriers in fourteen years. For-hire capacity has contracted for the past ten months, and with many large fleets having lowered capex budgets for 2024, delayed capacity additions are likely to continue.
Class 8 sales trends suggest the ongoing capacity additions at private fleets, a key reason the downcycle has drawn out so long, are slowing too, reducing overall capacity additions and downward rate pressure.
For more details on the trucking industry forecast for 2023, see ACT's freight & transportation forecast.