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 April 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
Freight Outlook Brightening
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.
Who's buying all these trucks?
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.
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.
Freight Volumes in 2024
While volumes remain broadly soft, the continuing strength of the US economy, alongside slowing capacity additions, gives us reason to think volumes will gradually improve in 2024. Inflation risk remains, but y/y declines in goods prices in recent months, while small, should help demand, as reflected by strong March US retail sales. Additionally, after a significant destock that began in mid-2022, loaded NA imports were up 26% y/y in February, though the later-than-usual Chinese New Year will likely result in lower March volumes.
Freight Rates in 2024
The market still favors 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 Index: Fleet Capacity continues to reflect challenging for-hire conditions, with low rates and higher costs making profitability hard to come by. As such, for-hire capacity has contracted for the past nine months, and with many large fleets lowering capex budgets in 2024 and delaying additions, capacity declines 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.