Maybe it’s just that the freight market is getting tired of the gloomy predictions for the rest of 2024, but there was quite a bit of positive news in May.
DAT Freight & Analytics reported that both dry van and refrigerated rates rose in May as the number of loads posted compared to available trucks also rose. Spot dry van average rates rose to $2.01 per mile, according to DAT, while refrigerated average rates rose by nine cents to $2.41 per mile. Flatbed spot rates stayed even for the month at $2.52 per mile.
DAT’s Truckload Volume Index might have been the best news of the month. The index represents the number of loads moved in a given month. Compared with May 2023, the index for dry van rose 13% while the index for refrigerated loads jumped by 25%.
The current low freight rates are caused by an overcapacity situation — there are too many available trucks and not enough loads. In May, shipment increases and truck fleet contraction combined to raise demand and lower supply.
That’s good news for beleaguered trucking businesses that are hanging on for better rates.
“Stronger van and reefer volumes are consistent with May, when shippers move seasonal produce and retail goods and truckload capacity tightens due to the Roadcheck inspection event and Memorial Day holiday,” said Ken Adamo, chief of analytics at DAT. “Carrier attrition created further pressure on capacity.”
DAT reported that contract rates did not fare as well, reporting dry van average rates at $2.43 per mile, down 2 cents from April, and refrigerated rates at $2.79, down 3 cents. While carriers that depend on contract rates won’t see this news as “good,” truckers who depend on the spot market can see that the difference between contract and spot rates is shrinking. That’s a sign the freight market is inching towards an up cycle.
The American Trucking Associations (ATA), whose members rely primarily on contract freight, reported a 3.6% increase in its For-Hire Truck Tonnage index for May. This follows an April decline of 1%. The ATA numbers are seasonally adjusted.
“May was the first month since February 2023 that tonnage increased both sequentially and from a year earlier,” said Bob Costello, chief economist for ATA. “While there was clearly an increase in freight before the Memorial Day holiday, it is still too early to say whether this is the start of a long-awaited recovery in the truck freight market.”
While DAT calculates its numbers from postings on its load board and ATA uses data reported by its members, Motive uses a different measurement — GPS data from trucks that have Motive products installed. In its June Monthly Economic Report, Motive reported that truck visits to the top 50 U.S. retailers increased by 4% in May from April and were up 7.8% over May 2023. While retailer visits across the board were up, Motive reported particularly high numbers of visits to home-improvement warehouses (29.1%), department stores for apparel and electronics (27.7%), and grocery (22.6%).
The Motive report cautions that some of the increase would have been due to the Memorial Day holiday but said the data indicates that retailers are “restocking at healthy levels.”
Motive predicts carriers will see profitability rise by the end of 2024 as rates increase, ultimately resulting in higher consumer prices. In addition, Motive predicts that retailers will need to rethink their restocking strategies. As freight rates plummeted, retailers could hold off on restocking inventories, confident they could find carriers to bring more at lowered rates. As rates increase however, waiting to reorder could mean higher shipping costs, so retailers are motivated to increase current inventory levels.
Another industry resource, Cass Information Systems, wasn’t as bullish about the coming months. The Cass Freight index for Shipments for May remained the same as April, and when seasonally adjusted was down 3.1%. Compared with May 2023, the index dropped 5.8%. Cass compiles shipment data from invoices processed for its customers and includes shipments from trucking, rail, air, pipeline and ship/barge. The index also contains LTL freight data and may have been impacted by the changes to the market after Yellow Freight’s bankruptcy.
The Cass Freight index for Expenditures showed a 9% decline from May 2023 and was down 23.3% from May 2022, a sign of just how far freight rates have fallen.
ACT Research included some of the Cass data in its release about prebuys of Class 8 tractors.
“Small fleets remain resilient as ever, but the record number of operating authority revocations over the past 18 months shows considerable capacity contraction,” wrote Tim Denoyer, vice president and senior analyst for ACT. “But we think the ongoing capacity expansion by private fleets is outweighing the capacity contraction in the small part of the market.”
Denoyer explained that in a “typical” freight cycle, as rates hit bottom carriers buy fewer trucks. As the number of available trucks shrinks, rates begin rising again.
The current cycle is different, however.
Private fleets that were burned by the record-high shipping rates several years ago are safeguarding themselves from a repeat — by purchasing more trucks. In addition, the 2027 model-year EPA requirements for emissions and efficiency, expected to drive the price of a new truck skyward by $30,000 or more, is resulting in more truck-buying now to avoid the price increases later.
At a time when the trucking industry needs to buy fewer trucks to lower capacity and cause rates to increase, it’s buying more. “To the ongoing question of whether the truckload market rebounds or continues to bounce along the bottom, this situation may lead to some more bounces,” Denoyer said.
Whether freight rates are beginning to rise or will continue their bounce along the bottom might be a matter of which industry resource is used for data, and one positive month doesn’t guarantee a trend. Still, with so many carriers struggling to survive, a little good news is a breath of fresh air.
Next month, we’ll have a better idea if May increases were the beginning of a trend or yet another bounce along the bottom.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
