ST. LOUIS — The latest freight numbers from the Cass Freight Index show that shipments fell 2.2% month-over-month in July and 1.2% month-over-month in seasonally-adjusted terms.
The index showed that July volumes were on par with January in absolute terms, despite 10% stronger seasonality.
On a year-over-year basis, the index was 8.9% lower in July, after a 4.7% decline in June.
“The freight market downcycle is now 19 months old, which compares to a range of 21 to 28 months in the past three downcycles,” according to a Cass news release. “Declining real retail sales and destocking remain the primary issues, but dynamics are shifting as real incomes improve and the worst of the destock is in the rearview.”
In seasonally-adjusted terms, the index is now 13% below the December 2021 cycle peak, slightly greater than the peak-to-trough declines in two of the three downcycles in the past dozen years.
“With normal seasonality, this index would increase slightly month-over-month in August but decline about 11% year-over-year, comparing to the extraordinary time last summer when destocking was actually creating freight demand as retailers were shipping out stale inventory,” the news release stated. “Even adjusting for the strange comparison, this will probably overstate the pressure on national freight volumes because the for-hire market is losing share to private fleets.”
The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, fell 2.8% month-over-month and 24.4% year-over-year in July.
“With shipments down 2.2% month-over-month in July, we infer rates were down 0.6% month-over-month,” the news release stated.
On a seasonally-adjusted basis, the index declined 2.0% month-over-month, with shipments down 1.2% and rates down 0.8%.
This index includes changes in fuel, modal mix, intramodal mix and accessorial charges.
The expenditures component of the Cass Freight Index rose 23% in 2022, after a record 38% increase in 2021, but is set to decline about 18% in 2023, assuming normal seasonal patterns from here, Cass officials noted.
Both freight volume and rates remain under pressure at this point in the cycle, but fuel price increases could limit the savings for shippers.
Cass Inferred Freight Rates decreased 0.8% month-over-month (seasonally-adjusted) after a 0.9% decline in June, as contract rates continued to reset lower.
“Based on the normal seasonal pattern, this index would decline slightly m/m in August, and the year-over-year decline would remain about 17%,” according to the news release. “We estimate lower fuel prices are knocking about 5% off freight rates y/y, and while fuel is a big factor, there’s clearly also still market pressure on rates.”
The Cass Truckload Linehaul Index, which measures changes in linehaul rates only, fell 0.2% month-over-month in July to 142.0, after a 0.4% month-over-month decline in June.
“The slower decline in the past two months likely reflects a combination of slightly higher spot rates and smaller declines in contract rates,” according to the news release.
On a year-over-year basis, the Cass Truckload Linehaul Index fell 12.7% year-over-year in July, after a 14.1% year-over-year decline in June.
Freight expectations
“We’ve been citing the key factors behind the freight downturn — substitution and inventory — for well over a year, but it’s not all macro factors,” the news release stated. “One key and likely underappreciated industry-specific factor is the rapid growth of private fleets. The publicly traded for-hire truckload fleets reduced their collective tractor count by 3% in 1H’23 and operating authority revocations remain elevated, so for-hire capacity is contracting quickly.”
However, Class 8 tractor production is still at maximum levels, growing the overall fleet, and consequently keeping downward pressure on spot rates.
Private fleets represent more than half of Class 8 tractor capacity, and “we believe their growth is pulling freight out of the for-hire market, prolonging the industry downturn,” the news release stated. “Though significant progress has been made in rebalancing, we think it’s unlikely that industry capacity will broadly tighten until pressure from private fleet growth eases, which looks unlikely this year. Though the freight market is still near the bottom of the cycle, the first step in getting out of a hole is to stop digging. New truck orders in the next few months will be very interesting and, in our view, will be pivotal to setting the market tone for 2024.”
The Trucker News Staff produces engaging content for not only TheTrucker.com, but also The Trucker Newspaper, which has been serving the trucking industry for more than 30 years. With a focus on drivers, the Trucker News Staff aims to provide relevant, objective content pertaining to the trucking segment of the transportation industry. The Trucker News Staff is based in Little Rock, Arkansas.
