Recent economic reports from trucking industry analysts show a decline in the freight market in the near term, but it could stabilize in the long term.
In ACT Research’s Freight Forecast for July, the firm affirmed its view that trucking is in the midst of a freight recession, forecasting that truckload and intermodal contract rates would fall this year due to overcapacity and weak freight demand. In turn, overcapacity is expected to give shippers the upper hand in rate negotiations.
“The bad news is we’re in a freight recession, and the factors we focus on tell us spot rates are headed still lower near-term, but that’s been going on for a while,” said Tim Denoyer, ACT Research vice president and senior analyst. "The good news is that for the first time this cycle, we see evidence on the horizon for an eventual bottoming and upturn in spot truckload rates, thanks to low new truck orders and improving capital discipline from the trucking industry.”
FTR’s Trucking Conditions Index, which tracks the changes in the freight volumes, freight rates, fleet capacity, fuel price and financing, showed a negative reading for the month of May, reflecting a general weakness in the major conditions that affect carriers. After starting the year with a positive TCI reading of 5.8, the index has fallen to a new low for the year of -2.3.
Despite the decline, FTR projects a relatively stable outlook for the rest of 2019, with the possibility of some month-to-month improvements.
“Although we have dropped from double-digit TCI readings to negative readings in less than a year, we believe the outlook for the rest of 2019 generally is for stability close to neutral conditions,” said Avery Vise, vice president of trucking for FTR. “It’s also important to recognize that most of the weakness is in the industrial sector, so trucking activity related to consumer demand should be relatively stronger than the rest of the industry.”
The Cass Freight Index, which measures freight volumes and expenditures of all transportation types and how they relate to the overall economy, has also tracked some alarming declines in 2019. At first, the analysts at Cass Information Systems chalked the declines up to difficult comparisons to 2018, which was a strong year for trucking. However as the declines continued and became more severe, it became hard to ignore the trend.
In May, shipments were down 6% year-over-year and fell by 5.3% in June. The shipments index has gone from a “warning of a potential slowdown” to “signaling an economic contraction,” according to the report.
Cass also noted a weakness in spot market pricing for many transportation modes, but especially in trucking. Spot pricing in trucking declined below contract pricing by so much that it will likely drive weakness in contract pricing. These numbers caused Cass to strengthen its concern about the overall economy and caution that our trade policy is risky in the current environment.
“Tariffs have throttled export volumes in many areas of the U.S. economy, most notably agriculture exports and other select raw materials,” the report reads. “We maintain hope that there will be a resolution; that there will be a trade deal because both China and the U.S. have to reach one.”