Analysts say trucking conditions will begin to improve — but slowly

For several months, there have been hints that the freight market is beginning to turn.

Unfortunately, spot freight rates have been bouncing along the bottom for so long that smaller carriers — and some larger ones, too — weren’t able to hold on. Those that remain should see market improvement, but analysts say it may be excruciatingly slow.

The Cass Freight Index showed a 1.7% decrease in shipments for September, following a 1.0% August increase. September shipments were down 5.2% from the same month of 2023.

The Cass Freight Index for Expenditures, however, rose 2.4% in September from August levels. Shippers paid more for freight transportation, even though diesel fuel costs declined during the month. The Cass Inferred Freight Rates, calculated from the total expenditures and shipments, showed a 4.2% month-over-month increase. While the rates are averaged from multiple modes of transportation and not taken from actual published rates, the trend is encouraging.

The Cass report, written by Tim Denoyer of ACT Research, points out that private fleets have helped prolong the down cycle in freight rates. Companies that were severely impacted by record high freight rates during the pandemic increased the size of their own fleets, putting less of their product on the spot market while taking loads that would have been hauled by for-hire carriers.

Denoyer mentions another event that could impact freight rates: The Federal Motor Carrier Safety Administration’s mandated automatic downgrade of CDLs when a driver is in a “prohibited” status takes effect Nov. 18, 2024. Under the “Clearinghouse-II” rule, states are required to downgrade CDLs to non-CDL status when drivers fail a drug or alcohol screen, refuse to test or are otherwise disqualified.

As of Nov. 18, all licensing agencies are required to be connected to the Clearinghouse database. As a result, states that were not previously connected could find drivers who are currently in a prohibited status but still driving. There’s no way to estimate how many drivers might lose their CDL privileges as a result, but the number could be significant enough to push freight rates upward — at least temporarily.

DAT Freight & Analytics, which operates the largest U.S. load board, began its October report by saying that September freight volumes and rates “signaled that the usual cyclical demand for truckload capacity is on the upswing.”

DAT reports that its Truckload Volume Index (TVI) declined for dry van, refrigerated and flatbed segments in September — but the declines were seasonal. They happen every September. The good news is that all three equipment types saw increases over September 2023. Van volumes increased by 6% and refrigerated by 12%, while flatbed volumes rose a more modest 2%.

“September showed we’re firmly into a new freight cycle after nearly 22 months of rather extreme expansion and 27 months of contraction,” said Ken Adamo, DAT’s chief of analytics. “We expect seasonality to provide some tailwinds over the next few months, and hopefully modest improvements in rates coupled with retail freight volumes and stable fuel prices can get the motor carrier base on more solid footing.”

The American Trucking Associations’ (ATA) Truck Tonnage Index fell 2.1% in September. Like the DAT information, the results were due more to the season than trends.

“Freight has been very choppy this year, but despite the latest drop, tonnage is up 1.8% since hitting a low in January,” explained Bob Costello, ATA’s chief economist. “No doubt, the climb up has been slow and difficult as manufacturing activity remains flat, but the trend is up, not down.”

Low freight rates are only one of the problems facing carriers.

Inflation has hit everyone hard, and small trucking businesses are no exception. The cost of trucks, parts, repairs and just about everything else has risen in the past few years. The exception is diesel fuel, which has declined in price.

While the rate of inflation has slowed, the cost increases brought about by higher inflation remain. Without a recession to “reset” the economy, prices won’t be going down; they just won’t be going up as fast as they were.

Financial services provider Deloitte, in its economic forecast for the third quarter of 2024, said that “robust consumer spending, high business investment and lower interest rates” have created optimism about the U.S. economy. The firm predicts that federal adjustments to interest rates will succeed in keeping inflation around 2.2% toward the end of the year. For 2025, an inflation rate of 1.5% is forecast.

The Fed’s Open Market committee meets again in early November and is expected to reduce interest rates another .25%. Deloitte predicts total cuts for 2024 of 1%, with another 1% through 2025.

The economic wild card for trucking could be the cost of diesel fuel. Military conflicts are ongoing in both the Middle East and in Ukraine — and both are regions that produce petroleum. Should either conflict escalate, crude oil prices could rise quickly.

Another potential issue could come as a result of the presidential election in the U.S.

Both major candidates — former President Donald Trump and current Vice President Kamala Harris — have discussed the possibility of imposing or increasing tariffs on foreign goods.

When tariffs are involved, imports and exports are impacted. The result can be changes in the amount of available freight, pushing rates up or down.

The short-lived labor stoppage at U.S. East Coast ports has been settled, for now. The International Longshoremen’s Association and the U.S. Maritime Alliance agreed to a tentative deal, extending their current contract to January 15, less than a week prior to the inauguration of the next U.S. president. Expected freight shortages throughout this year’s holiday season have been averted.

The agreement calls for a 61.5% pay increase for workers with other issues to be ironed out in negotiations by the January 15 deadline. Perhaps the largest issue to resolve is that of automation. The U.S. lags behind other countries in the degree of automation used. The 85,000-member union seeks to preserve jobs, while port operators look to increase efficiency and reduce costs.

The months ahead should see trucking conditions improve, but slowly.

Cliff Abbott

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.