Thank you so much for taking the time to read the March Truckload Market Update! This is a monthly newsletter, released the first or second week of every month, be sure to subscribe to be notified when the updates are released!
There has been an ongoing battle against inflation in the US economy by the Federal Reserve. They have been attempting to tame inflation without driving up unemployment rates and pushing the economy into a recession. One of the reasons that inflation rose so quickly was the robust labor market that grew post pandemic lockdowns. I have been saying for over a year now that we need to see significant cooling of the labor market to help cool inflation. It would appear the labor market has made good progress in moving this direction, and Matthew Klein writes that:
The latest comprehensive estimates of actual wages earned across the U.S. based on taxes paid into unemployment insurance coverage suggest that both average and aggregate wage growth has slowed dramatically in 2024. And while the January personal income numbers imply that the average American got a substantial pay bump, with personal income before transfers rising at a 9% annualized rate, that seems to be driven by a surge in dividend payouts that is unlikely to finance much, if any, consumer spending.
The sustained increase in consumer spending on goods over the last several years contributed to the inflation of consumer goods products, and spending was driven by strong wage growth and stimulus. As stimulus savings ran out, wage growth continued allowing consumers to maintain their new spending levels. So now we find ourselves with cooling wage growth and little optimism around a new surge in consumer spending. However, despite the decrease in wages, inflation has been rising again across many manufacturing inputs and goods.
Matthew goes on to credit this uptick in part to the decreases in wholesalers inventories. This was covered in previous newsletter editions, but even as retail inventories were decreasing to acceptable levels the last couple of years, wholesale inventories remained elevated. As wholesalers have worked down their inventories this is putting slightly more pressure on manufacturers to produce new goods instead of drawing on inventories that already exist.
Speaking of manufacturing… Manufacturing firms' new orders suggest we may have reached the bottom of the current downturn. We have some initial signs on the new order front that we may be seeing some growth in the manufacturing sector. A reminder that domestic manufacturing accounts for what is estimated to be 60+% of trucking ton miles, which is why we follow it closely in this update.
As Jason Miller wrote in his recent post: “ISM's seasonally adjusted new orders index is hovering around 50 (the threshold for expansion), though still far from levels that truly suggest expansion (e.g., 55).
Overall, the US economy has been praised for its resilience and strong growth over the last year. Edward Jones Commented on the primary leaders in the US Stock Market and said:
"The three conditions that are likely needed and that will likely be in place later this year for the leadership rotation to materialize are
In other words, for companies to emerge as new leaders in the stock market, there will need to be interest rate cuts to stimulate business growth and consumer spending on goods, and increases in domestic manufacturing activity. This sounds very in line with what many truckload market experts have been saying is needed for rate increases in the full truckload market for months as well. What is interesting is that Edward Jones seems confident both of these conditions will be present at some point in the later half of 2024.
Some experts in the truckload space have remained optimistic that we may see a change in rates as early as Q2, but I think that those hopes should be waning.
With decelerating wages, and what may be re-accelerating inflation on goods, I think it is safe to say we will not be seeing a major demand side (trucking volumes) stimulus in the full truckload market in the next couple of months stemming from consumer spending.
As we move through the year we will continue to keep a close eye on inflation, wages, consumer spending, interest rates, and manufacturing activity to better forecast the direction of the full truckload market (and the broader economy).
February spot market rates were not hopeful for carriers operating in that space. Overall we saw decreases in the space from the month prior. Contract rates remained stagnant or decreased across mode types as well, which led to no progress in the tightening of the gap between spot and contract rates. The market is still operating with ample supply (trucking capacity), and as long as the demand side (volumes) remain static we will continue to see capacity leave the market as carriers close their doors after struggling through almost 2 years of tough market conditions. Let’s dive into further detail around the state of rates in the full truckload market, through data in collaboration with reliable industry leading experts.
In collaboration with industry thought leader Jason Miller:
The dry van spot market cycle indicator (SMCI), calculated from broker buy contract rates and dry van spot rates (both including fuel). The formula is SMCI = (Contract – Spot) / ((Contract + Spot)/2). As can be seen, February showed a substantial upward increase to 18.8%, which places us solidly in bear market pricing territory.
DAT’s dry van spot pricing and broker buy contract pricing (including fuel). We see the increase in the SMCI was due primarily to February’s spot rates dropping $0.07 relative to January. This drop can’t be explained by diesel prices, which rose in February from January. On the positive front, March is the month where freight volumes will start to shake off the winter lows, though I will caution that the seasonal adjustment model I use for the trucking ton-mile index is expecting March 2024 to be weaker due to March starting on a Friday plus featuring Easter. However, April is predicted to be stronger than March (unusual) due to it starting on a Monday.
In collaboration with DAT:
Dry van rate averages decreased in both contract and spot spaces over recent weeks due to a weak February.
Reefer rate averages decreased in both contract (barely) and spot spaces over recent weeks due to a weak February. There are also reports that produce volumes have been noticeably weaker thus far this year.
Dry Van spot and contract rates YOY% change:
Reefer spot and contract YOY% change:
A VERY important case for the direction of "Nuclear Verdicts" in the trucking space is nearing a final decision after years of legal battles:
“The facts of the accident are not in dispute. A pickup truck heading east on Interstate 20 in West Texas driven by Trey Salinas and ferrying members of the Blake family hit a black ice patch, streaked across a more than 10-yard-wide median and crashed into a westbound Werner truck driven by Shiraz Ali. Winter storm watches were in effect. One of the Blake children died, and a second was severely injured. Other passengers had less serious injuries.”
Nestle is preparing to open a new manufacturing plant in Phoenix, adding new truck ton volumes to the metro
"Construction is nearly complete for Nestlé USA's coffee creamer manufacturing plant in metro Phoenix.”
Brought to you by TAI TMS
Episode 30 with Sean McGillicuddy - TAI TMS
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Episode 31 with Chris Pickett - Flock Freight & Pickett Research
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