Is the freight recession finally over? The experts aren’t sure, but there’s a light at the end of the tunnel
The title of the press release said it all: “For-hire rate recession is over.” That’s good news for carriers who have been struggling to hold on until freight rates improve. The Nov. 22 press release from ACT Research included comments from ACT’s vice President and senior analyst, Tim Denoyer. “Currently, with a significant capacity contraction by for-hire fleets and private fleet insourcing slowing, capacity has finally rebalanced enough for rates to start moving higher,” he noted. Unfortunately, not everyone agrees that the freight market is currently entering a new phase. “My belief is that we are in what I’d term “freight cycle limbo” in that the down cycle that started in Q3 2022 has indeed bottomed out, but we aren’t yet in a true upcycle,” said Jason Miller, professor of supply chain management at the Michigan State University Eli Broad College of Business. “That upcycle will wait till late Q1 or early Q2 2025 to materialize.” So, who’s right? According to DAT Freight and Analytics’ Trendlines, dry van spot rates rose by a nickel per mile to a national average of $2.02 in October. Flatbed rates also rose, but at $2.41 per mile they still haven’t reached the August rate level. Refrigerated rates also rose in October to $2.39 per mile on the average — but that’s still a penny beneath the August average. Perhaps the most telling DAT statistic is the load-to-truck ratio for each category. After all, more loads per truck means more competition for trucks, pushing rates upward. In October, there were 4.13 loads posted on the DAT load board for every truck posted. In October 2023 that number was 3.01, so the numbers show a 37% increase in loads. In the refrigerated segment, 5.85 loads were posted for each truck, a 30% increase from October 2023. For flatbed, 14.31 loads were posted for each truck posted, an increase of nearly 63% over October a year ago. When average spot rates are compared, however, there hasn’t been much progress. Van spot rates increased just 0.5% year over year, refrigerated rates actually declined by 2.1%, and flatbed rates climbed 3.2% over October 2023. The price of diesel fuel also plays a role in freight rates. Fuel is cheaper today than it was a year ago, so excluding fuel costs, the rates look better. “With DAT spot rates net fuel tracking 7% higher than a year ago in Q4, contract rates are rising modestly but consistently across DAT data, Cass data, and fleets’ financial reports for the first time in three years,” said ACT’s Denoyer. “The market is very close to balance, and in 2025 the combination of normalizing equipment supply and a pre-tariff safety stock build are poised to drive higher for-hire freight demand and rates.” The Cass Freight Index for Shipments wasn’t as positive, showing a 1.9% decline from September and a tiny 0.1% decline from October 2023. The Cass Index for expenditures was also down, dropping 1.5% from September and 1.7% from last October. But keep in mind that the Cass report isn’t exclusive to trucking — it also includes data from rail, air, barge, ship and pipeline modes of freight transportation. A telling number comes from a chart included in the Cass report, which shows reported fleet sizes for 13 of the largest publicly traded carriers. For the first quarter of 2023, those fleets reported a total of 117,103 tractors. In the third quarter of 2024, that number had dropped to 107,191. That’s nearly 10,000 trucks removed from the freight hauling market, and the figure doesn’t count smaller carriers that have either downsized or closed up shop entirely. Other factors in play Looking at the broader picture of U.S. production, Miller’s view is less optimistic. He referenced two Reserve Economic Data (FRED) charts in his opinion. One showed the seasonally adjusted industrial production of fabricated metal products. “The past few months have seen sharp declines in production,” he wrote in a LinkedIn post. “Drawdowns in fabricated metal production in 2015 and the especially steep drop in 2019 corresponded to freight recessions.” Miller notes that production has been trending down since mid-2022. A second chart shows that wood product production is still beneath 2017 levels. “You will note how production started falling in Q4 2018, which was the same time the FOMC had started raising interest rates,” he wrote. Those two areas of production are vital to the manufacturer of automobiles, appliances and machinery as well as products for home building, which are subdued by the current higher interest rates Miller wrote, “As November and especially December exhibit seasonal tightening, we won’t truly know if the freight recession is over until mid-January (and that assumes no extreme weather events like in January 2018 or January 2024).” Better days expected ahead Still, as Miller considers the manufacturing side and Denoyer looks toward the capacity side, it seems evident that the market is approaching an upturn, if it isn’t in one already. Denoyer thinks the reduction of capacity in trucking may be enough to overcome any slowed production, at least temporarily. “After a long downturn in freight rates, the difference between the 5.9% contraction in capacity and the 2.8% drop in shipments may help explain why TL (truckload) rates have started to rise, if only by a little,” he said. “The big private fleet expansion of the past two years will likely still leave anyone looking for a boom disappointed, but the for-hire rate recession is finally over.” Back at DAT, Ken Adamo, chief of analytics, says the numbers are looking positive. “October continued the pattern of year-over-year gains in spot truckload rates and volumes, while contract rates approached parity compared to October 2023,” Adamo said. “Five months into it, the contours of this freight cycle look conventional, like the 2013-2017 cycle, when monthly spot van rates averaged +5% year over year.” Whether the end to the freight recession is a few months away or has already started, light is finally visible at the end of the tunnel. Better days are ahead for the trucking industry.
