In this Monthly Market Update, we will (a) provide a brief update/analysis of the full truckload market and (b) present a compelling economic analysis to provide a macroeconomic view of the state of the freight market.
Full Truckload Market Overview
Figure 1
Rates: Our price index fell 10.8% MoM in July. This decline was mainly due to a price spike on the last day of June, which usually occurs just before the 4th of July. Prices rose about 15% over the 4th of July week and went back to June levels after the middle of the month.
- On a monthly average, our index improved 5.3% from June to July, which is in line with historical trends. Prices typically increase by an average of 5% from June to July, according to our historical price index data - 2019 to present.
- The US OTRI fell from an average of 6.3% in June to 4.5% in July.
Figure 2
Volumes: Our volume index rose 36% MoM in July. Our volumes surged in late July due to a recovery in demand in the Northeast and Midwest states.
- Most of July's demand originated from consumer retail.
- Contrary to our index, Sonar's OTVI decreased by 1.7% in July but was still 5% higher than last year.
Quote rate performance by region
The map shows the average MoM percentage change in quote rate-per-mile for various US Key Market Areas (KMAs).
- Prices in the South are starting to cool off. KMAs in Florida, Alabama, and Louisiana, such as the Miami, Mobile, and Shreveport Mkts, experienced MoM quote rate declines for the first time in four months.
- We anticipate further stagnation in the Southern region in August.
- The new pocket of tightness is expected to shift to the West Coast as holiday season import pre-ordering typically occurs between July and September.
- In the Midwest and Northeast, prices bottomed out in April/May and remained low until mid-July, when they began to catch up with the rest of the country.
Figure 3
Figure 4
Loadsmart’s spot rate forecast / look ahead
Our model predicts that spot rates will decrease from $2.70 in July to $2.64 in August. Prices should stabilize around ~$2.65 until November.
- In the 2Q24, we revised our forecast model as the market deviated from the previously projected recovery cycle.
- Using data from this new price curve, we stated that despite the lack of conditions for a sustained recovery, May would be the low point for the year, and prices would rebound slightly in June and July, rising from $2.46 in May to $2.65 in July.
- We were right about the timing of the rebound, but July prices exceeded expectations and reached $2.70, a new YTD high.
- July's recovery exceeded our forecast due to the long lasting effects of the July 4th week.
- Our updated model now suggests a consolidation of this new price level of ~$2.65 throughout the 3Q. The next great move will come during the holiday season - in December and January.
- Prices are expected to peak at $2.81 in December 2024 and remain high into January before cooling in early 2025, which is in line with typical seasonal patterns.
Figure 5
Freight & Economics
Manufacturing PMI slips into contraction
- The manufacturing PMI fell to 49.6 in July, crossing below the 50.0 mark for the first time in seven months, indicating a contraction in manufacturing activity (see Figure 5).
- Although the decline was modest, the underlying figures point to further deterioration in the months ahead. New orders and stock purchases declined. The accumulation of post-production inventories was the strongest since November 2022—pointing to a bearish outlook for freight activity in the 3Q.
Figure 6
- Manufacturing accounts for about 60% of for-hire truck ton-miles (Miller, Phares, & Burks, 2024). But manufacturing has spent most of the past year in the contraction zone without further weakening the truckload market, thanks to strong retail activity.
- However, with the current retail slowdown, there are no macroeconomic drivers for an upcycle in the trucking market.
- The silver lining is that this slowdown is still seen as temporary due to the elections. According to the S&P report, "many firms are expecting the weakness to be temporary, linked to paused spending and investment ahead of the Presidential Election."
Spot to contract spreads - what to expect in 2H2024
- With spot rates rebounding in Q3, shippers with locked contracts are paying less to move their freight for the first time in almost two years - figure 7.
- For loads with pickup dates in the May 24 - August 24 (tentative) period, the average contract rate was 3.2% lower than the spot rate. For the June 22 - April 24 period, contract rates were 4.8% higher on average.
Figure 7
- If spot rates are persistently higher than contract rates, this signals that contract rates should soon rise as well in the 2H2024.
- However, given the prevailing market uncertainty, the spread between spot and contract rates is expected to remain narrow. It remains uncertain whether prices will inch up during the holiday season as they did during the produce season.
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Please reach out to Stella Carneiro (stella.carneiro@loadsmart.com) with any questions, suggestions, thoughts, etc. #movemorewithless