The rebalancing process in the US freight market is being drawn out by reluctance to part with workers and significant private fleet capacity expansion, even as pressure on fleets worsened this month as diesel prices spiked, according to the latest release of the freight & transportation forecast.
“Although seasonality remains loose and demand soft, spot market dynamics have begun to shift since the end of operations at Yellow on July 31. While this is a game-changer for LTL rates, so far, the truckload market is still loose enough for rates to be largely unaffected. We see the impact growing over time, along seasonal patterns,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst.
The publicly traded for-hire fleets reduced their collective tractor count by 3% in 1H’23, but Class 8 tractor sales and production are still near maximum levels, adding considerably to the Class 8 tractor fleet. Private fleets are still growing and pulling freight from the for-hire market.
“Class 8 orders will be very interesting over the next several months and, in our view, pivotal to setting the market tone for 2024,” Denoyer concluded.
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.
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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