Freight market growth will be short-lived
Positive signs in the OOIDA Foundation’s December freight market update are only seasonal, not the start of any recovery.
Additionally, the Total Spot Market Cycle Indicator moved further into negative territory during the peak shipping season.
Weak manufacturing and a soft housing market are among the negative indicators.
Dry van and reefer spot rate increases reflect seasonal patterns, while recent weather disruptions have temporarily tightened capacity.
According to the Foundation, operating costs are rising, demand is soft and rates are flat, leading to a negative outlook for the freight market.
The Cass Shipment Index was up month over month but down year over year. The Truckload Linehaul Index increased for the third consecutive month and was positive for the 10th consecutive month.
“Though not necessarily sustainable, the stormy winter combines with tightening capacity and contributes to the eventual cycle turn,” Cass said.
Metrics in the Logistics Managers’ Index were driven by downstream retailers, likely due to seasonal movements.
U.S. sanctions and OPEC production decisions are tightening the global oil supply. Fuel prices have increased in two of the last four months. The average diesel price was higher year over year for the fourth consecutive month.
Used truck prices continue to align with demand.
“It seems pretty clear the used truck market is reflecting a soft freight environment,” Steve Tam, vice president at ACT Research, said. “Load and truck postings also declined in the spot freight markets from October to November.”
U.S. manufacturing contracted at a faster rate, with 11 of 17 industries reporting contraction.
The Housing Market Index showed that 40% of builders cut prices, and that the highest share of sales incentives was used post-COVID.
By specific market
Van demand saw an unusual seasonal drop across all regions. Spot rates rose, with the largest increases on the West Coast.
Demand was also down across flatbed. This was the eighth decrease in nine months.
Reefer rates increased for the fifth consecutive month, up year over year. Demand was down.
Estimated for-hire entries were typical of the season.
The complete December freight market outlook is available on the OOIDA Foundation website. LL