Loadsmart First Look Weekly Market Recap: Nov 17 – Nov 23
This is a weekly series that brings the insights we use to get your shipments from A to B from our carrier sales floor to your home office.
This week Loadsmart’s Capacity Solutions Manager, Jimmy Fahey, breaks down what happened last week and what to expect this week in the freight market in less than 60 seconds.
What We Saw Last Week
- Last week we saw releases for industrial production, retail sales, and housing starts.
- Industrial production moved up 1.1% for the month, but is down 5.3% YoY. This shows some momentum building for manufacturing
- Retail sales were positive for the month with a modest 0.3% gain, but the pace is slowing. Overall sales are still 8.5% above last year’s levels, but slowing as well and may continue to due so with the increase in COVID-19 cases, the lack of stimulus, and the possibility of more restrictions being put into place.
- Housing starts were robust, up nearly 5% for the month and hitting levels not seen since 2017. Growth in single family homes lead the charge and builders are struggling to keep up with demand.
- The Cass Freight Index was released last week and showing its first YoY shipments increase in nearly two years during October. Shipments climbed 2.4% during the month with expenditures rising 3.1%. This shows the highest YoY growth since Oct. 2018 and 27.8% above the April bottom. Analysts expect this to continue through year-end, while analysts point to lean inventories as a catalyst for future growth. Stifel analyst David Ross expects the linehaul rate index to improve in the coming quarters as contracts are renegotiated higher. More rate increases are ahead for carriers in Q420 and 2021, but the debate is how high they will go, as increases between 6-12% have been mentioned.
- The Federal Maritime Commission, the US Agency that regulates ocean commerce, announced an investigation on Friday into the practices of foreign-owned shipping carriers. US Exporters and truckers have complained that they often face disadvantages at the ports. The US agricultural has long complained that foreign carriers are rejecting their exports in favor of sending back empty containers to be filled with Chinese goods. The carrier’s reasoning behind the refusal is driven by money and the lack of containers needed to move Chinese exports around the world.
- US ag exports are cheaper to move and take longer to offload, while carriers can turn a larger profit by sending empties back to China and filling them with Chinese exports along the lucrative trans-Pacific waterway.
- The Harbor Trucking Association has said that community in Southern California has paid over $100 million in penalties this year and that the carriers have created the perfect scenario to profit from inefficiencies.
What To Expect This Week
- Expect capacity to be extremely tight this week as drivers start to head home for the Thanksgiving holiday. Even a small decline will have a big impact in the market already experiencing peak season levels. Outbound tender rejects have already climbed over 27% indicating that rates are already elevated and trending upwards. Spot rates will continue to climb daily, as carriers take advantage of the pressures shippers are under to get loads out during a short week; while shippers will need to prioritize the most time-sensitive freight for the next month.
- Capacity tightened for all three modes this week, but Reefer OTRI hit an all time high of 48%. Reefer capacity continues to climb disproportionately van capacity, despite moving in sync from May until about mid-August. Expect reefer capacity to continue to remain elevated into the winter months with protect from freeze shipments increasing.
- This week we will receive updates for consumer spending and capital good orders. Spending has been strong despite high jobless claims and the expiration of increased benefits. Capital goods spending is still below last year’s levels, but momentum is building. Increases in capital good orders will lead to increased manufacturing production and high flatbed volumes
- Distribution of the first COVID-19 vaccines in the US could begin as early as Dec. 11th according to advisers of Operation Warp Speed. The government’s vaccine program has been ramping up preparations to distribute doses across the country and officials expect about 40 million doses to be available by the end of Dec.
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