As usual, in this Monthly Market Update, we will (a) provide a brief update/analysis of the full truckload market and (b) present some compelling trucking-related economic analysis to provide a macroeconomic view on the state of the market. We hope you enjoy! #movemorewithless
Our volume index increased by 4.5% in January (day 01 to 31). The daily average of volumes for January rose to the highest since August 2022. This volume hike was unexpected as the January to March period is typically defined as a “quiet post-peak season”, but we speculate this could have been a delayed effect of the holiday shipping season, which was largely muted in Q4’22. The Midwest (Illinois, Ohio, Missouri, and Wisconsin) contributed the most to the rise in volumes, as 44% of LS volumes moved in January came from this region.
Our price index decreased by 4% in January (day 01 to 31). Prices peaked in the first week of the month – likely still boosted by the holiday season’s tightened capacity; then they fell back to December 2022’s floor, and mildly recovered after. The first week’s price surge was sharper in the West (California, Oregon, Colorado, and Utah), where prices hit their highest level since October 2022.
Contract rates & spot floor: As we have mentioned in the past few monthly updates, we expect the spread between contract rates and spot rates to shrink over the next two quarters. Not only are network bids resetting contract rates 15%+ lower YoY on average (pulled from Loadsmart bid data), but we also believe spot rates have hit their floor for 2023.
We predict another increase in inventory to sales metrics as the Advance Retail Sales Survey reported a decline in sales for December – which suggests that holiday deals were not enough to provoke a shopping spree large enough to take significant inventory off the shelves.
Industrial production slumped 0.7% MoM. The index has been declining since September 2022, potentially due to weaker consumer demand. As expected, the fall in production was more pronounced for cyclical sectors, which are more likely to have their consumption postponed during recessions: durable goods output fell 1.3%, while non-energy nondurable goods production fell only 0.5% – see Figure 5.
For the truckload market, the slowdown in manufacturing suggests further declines in freight volumes in the near term.
On the positive side, however, this is another indication that diesel prices will continue to drop in the coming months due to an excess of oil supply over demand (see the latest EIA forecast).
As always, please reach out to Stella Carneiro (stella.carneiro@loadsmart.com) with any questions, suggestions, thoughts, etc. Thank you!
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