There are real hopes that freight rates for truckload linehaul and intermodal movements may finally be headed higher, after being frozen in lower territory the last couple of years.
The most recent Cass Truckload Linehaul Index, which tracks monthly changes in linehaul rates, fell 0.9% in December, marking 10 straight monthly declines. But analysts at the investment firm Avondale Partners said there is cause for optimism.
That’s because the December reading improved 2.6% compared to the month before. That marked the index’s biggest month-over-month gain of 2016 and its highest reading since December 2015.
“The current strength being reported in spot rates is leading us to believe that our current -3% to 1% truckload pricing forecast may need to be improved or moved to a slightly more positive outlook,” Avondale said.
The intermodal sector, which suffered much of last year and the year before, at least compared to 2014, is expected to see some improvements as well. The Cass Intermodal Price Index, which measures changes in total intermodal per-mile costs (including fuel), increased 1.5% in December compared to a year earlier. That’s after rising 0.3% and 0.4% in November and October, respectively, while posting a 2.8% December hike from November. December marked the third consecutive year-over-year gain after 21 straight months of declines.
The good news is Avondale expects intermodal pricing to improve year-over-year until late into 2017. The bad news is pricing isn’t expected to reach the high levels of three years earlier.
On top of this, the Cass Freight Index, which measures monthly expenditures for shipments across multiple modes, was down far less in December compared to much larger declines earlier in the year. That was due to steady increase in fuel prices over the last six months and what Avondale Senior Transportation Analyst Donald Broughton said are “some improvements in the pricing power of truckers and intermodal shippers.”
“If the winter of the overall freight recession we’ve been in for more than a year and a half in the U.S. is not yet over, it is certainly showing promising signs of thawing,” said Broughton.
Broughton and Avondale are not alone in their optimism. American Trucking Associations Chief Economist Bob Costello late last month said he sees “positive signs for truck tonnage.” Although the group reported truck tonnage in December was down 6.2% from the month before, it was up 2.5% for all of last year.
Costello attributed the gain to “continued spending by consumers, larger wage gains, and solid home construction. Factory output will continue to be soft, but it should be better this year than last year. And most importantly, the supply chain continues to make progress reducing bloated inventories, which will help truck volumes going forward.”
Sounding a similar note is DAT Analyst Mark Montague. He has gone so far to say that an 18-month downturn in freight, triggered by the collapse of worldwide oil prices at the end of 2014, is officially over.
While the news indicates that at least initially 2017 won’t be as good as a couple of years earlier, the year still looks promising for trucking and the economy. And that certainly beats the chill in the air the industry felt last year.