Loadsmart’s Look Ahead: An Analysis of Key Freight & Economic Indicators to Watch in September
As usual, in this Monthly Market Update, we will provide a brief update & analysis of the full truckload market and present some compelling trucking-related economic analysis to provide a macroeconomic view on the state of the market.
Please reach out to Stella Carneiro (firstname.lastname@example.org) or Jon Payne (email@example.com) with any questions, suggestions, thoughts, etc. Thank you! We hope you enjoy! #movemorewithless
As of September 1, 2023, our model correctly predicted that rates would increase in August, though they increased by $0.04 more than we predicted.
By the end of 2023, our forecast calls for prices to rise to $2.56 (an 8.9% increase from July's low) and continue on an upward trajectory through 2024.
August's Full Truckload Market Review:
Figure 2Rates: Our price index increased by 3.1% MoM in August, up 25% from May’s/June’s bottom. However, this increase from the bottom is estimated to be closer to +15% if you account for the fact that diesel prices rose by +$0.40 in August.
- On a YoY basis (as seen in Figure 3 below), our spot rate index is now only -3.5% YoY, which is the lowest this gap has been since Q1’22. This further supports signs that we are slowly but surely transitioning into an inflationary cycle.
Freight & Economics
Spot and Contract Rates ConvergedThe slight recovery in the spot market paired with 7 quarters straight of contract rate reductions have finally brought the two together. Current Loadsmart data, which is not a perfect representation for the rest of the industry which likely has more of a lag, suggests that average spot rates just crossed above the contracts ones for the first time since Q1’22 - as shown in Figure 4.
- The difference between the rates in the two markets is minimal for now, but it comes at a key time for negotiations in the contract market as peak RFP season (Q4/Q1) is approaching rapidly.
Figure 4Typically contract rates lag spot rates by about 6 months, but because the spot rate increases have been so minimal, we don’t anticipate material contract rate increases until Q2’24 at the earliest.
Real retail sales rose 0.5% MoM in July, and August data should show further gains once it is available - Figure 5. According to the National Retail Federation, "consumers are expected to spend record amounts on both back-to-school and back-to-college shopping this year," boosting sales for another month.
August typically sees a MoM inch up in sales due to back-to-school and end-of-summer sales. It is also the start of the peak season for the freight industry.
The monthly increases in retail sales since March have so far not been enough to push the year-on-year growth rate above zero. Freight volumes are also still at a low level compared to last year (Loadsmart volumes are down 18% YoY and Sonar OTVI volumes are down 10% YoY).
A strong back-to-school season can be a sign of a better holiday season to come. If it is confirmed to be stronger than last year, it may indicate that we have a better holiday season ahead.
No Comments Yet
Let us know what you think