Freight Rates Expected to Fall, But Truck Production Remains at All-Time Highs

In its latest Freight Forecast, ACT Research maintained its view that truckload and intermodal rates will fall this year due to overcapacity and weak freight demand.

Despite conditions that indicate overcapacity and low truck orders, new truck production is still at all-time highs as manufacturers work through the sizable backlog of orders from last year’s boom. As a result, capacity additions are expected to continue through the end of 2019 and ACT estimates that the active tractor fleet will grow by 2.5% in the second half of the year.

A freight recovery is possible in 2020; however, uncertainty surrounding the trade dispute between the U.S. and China could affect the outcome.

“Truck production remains near record levels, and though backlogs are dwindling quickly, elevated retail sales are set to continue for several months,” said Tim Denoyer, ACT Research’s vice president and senior analyst. “Low Class 8 net orders bode well for an eventual upturn in the truckload spot market, but continuing capital discipline and ongoing economic growth, supporting a recovery in freight in 2020, are necessary conditions. Recent trade policy developments have increased the risk of a broad recession.”

ACT Research’s Truckload Rate Gauge, which is a measure of the industry supply and demand that takes into account the number of active trucks and the number of available freight, is currently indicating an excess of capacity, favoring shippers. However, Denoyer said that based on ACT’s expectation for a decline in Class 8 truck build rates later in the year, the supply side should begin to balance out the demand.

For more information about ACT’s Freight Forecast, click here.