Loadsmart’s Look Ahead: An Analysis of Key Freight & Economic Indicators to Watch in July 2024

As usual, 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 on the state of the freight market. 

Full Truckload Market Overview

Figure 1

Rates: Our price index increased 9.5% MoM in June. The large increase was mainly due to a rate spike on the last day of June, which is a common occurrence before the Fourth of July holiday.

• Our monthly average price rose 7% in June, in line with seasonal expectations.
  • Historically, prices increase by approximately 8% from May to June, according to Loadsmart data from 2019 to 2023. This increase is usually driven by rising demand due to the onset of summer and holidays such as Memorial Day, Juneteenth, and Fourth of July, which often lead to transportation bottlenecks.
• The US OTRI reached a year-to-date high, with an average of 6.3% for the month, an increase of 2 percentage points compared to May.

Figure 2

Volumes: Our volume index decreased 13% MoM in June. Demand and prices rose in late May and early June, driven by increasing demand in Texas and Georgia, but returned to average May levels after the first week.

• Most demand originated from automobile parts and retail goods - electronics and superstores goods. 
• Sonar's OTVI reached a year-to-date high. Volumes experienced a typical spike after Memorial Day and remained elevated for the rest of the month. The average monthly OTVI increased 13% from May to June.

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).

• For the third month in a row, we see a striking difference in the freight market between the South and the Midwest.
  • Historically, rates in the South have been lower than those in the Midwest. This gap widened in the first quarter of 2024 due to high rejection rates in the Midwest caused by severe weather.
  • But in the second quarter of 2024, low demand led to declining rates in the Midwest. Rates in the Midwest bottomed out in May and have remained steady since.
  • In the South, contrarily, rates have been on an upward trend since the end of May.
• Rates have also improved in the Pacific West region this month, with California likely benefiting from increased imports at West Coast ports in June.

Figure 3

Figure 4

Loadsmart’s spot rate forecast / look ahead

Our model predicts that spot rates will increase from $2.66 in June to $2.8 in July.

• Prices are expected to hover around $2.8 through September, which aligns with last year's seasonal patterns. After September, the market is expected to "cool off" a bit and stabilize around $2.7 till the end of 1Q2025. 
• Prices are expected to reach $2.73 in December 2024 and continue to rise until May'25, when prices peak at $2.93, 24% below the Jan'22 high.

Figure 5

• We do not anticipate structural changes in the truckload market that would result in a cycle of continuous rate increases in 2024, given the current market overcapacity.
• As shown in Figure 5, the number of active carrier authorities in the market has been declining since September 2022. 
• However, the pace of this decline has slowed since early 2024, indicating that the market is likely to return to a more balanced carrier supply only after mid-2025.

Figure 6

Freight & Economics

Imports recovery and truckload rates

• Import volumes rose steadily from February 24 through May 24, as shown in Figure 6, which could be a bullish trend for the truckload market. 
• Typically, an increase in imports would lead to higher demand for dry van in Key Market Areas (KMAs) near ports as goods are moved to nearby warehouses or distribution centers, driving up rates. 
• However, the increase in imports has not been accompanied by a corresponding increase in truckload rates, even in the port-associated KMAs, as we would expect, as shown in Figure 7. 
• This discrepancy suggests that imports are unlikely to be a significant demand driver for the truckload market. 

Figure 7

Figure 8

• Overall import volumes were up 5% year-over-year in May, with East Coast ports benefiting the most. But rates at New York/New Jersey area have been declining since February 2024.
• Only the Los Angeles KMA experienced a price increase beginning in April, but likely an indirect effect of rising rates in the southern regions due to the production season, as shown in Figure 8.

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Please reach out to Stella Carneiro (stella.carneiro@loadsmart.com) with any questions, suggestions, thoughts, etc. #movemorewithless