OOIDA Foundation offers August Market Update

The OOIDA Foundation has released its most recent Market Update.

Overall, the OOIDA Foundation’s freight market shows operating costs are elevated, while volume and demand are steady. In addition, rates are flattening, capacity is loosening and the future outlook is restrained, according to the Foundation update.

Below is a summary of each of the additional four key markets the OOIDA Foundation examines each month.

Van market

The van load-to-truck ratio dropped 7.8% month-over-month to 3.54 in August. This is the third consecutive month of decline. However, the decrease in the load-to-truck ratio is more due to an increase in capacity than a decline in volumes, said the Foundation report.

As capacity increases, shippers will continue to gain the upper hand in negotiation rates, placing downward pressure on rates. The question is, will rates follow their normal trend and increase during the holiday season or will they continue to flatten?

Although the consumer price index is significantly high due to inflation (8.5%), people are still purchasing goods.

E-commerce activity represents about 18.7% of total retail sales, and has increased 2.7% quarter-over-quarter to $257 billion. This is 44% higher than the five-year trend.

Retail sales are not expanding as they once were, but they aren’t exactly declining either, the OOIDA Foundation reported.

Flatbed market

As with the van market, the decrease in load-to-truck ratios is more due to an increase in capacity than it is a decline in volumes, the OOIDA Foundation reports. The flatbed load-to-truck ratio dropped 35.2% month-over-month to 14.1 in August, the fifth consecutive month of decline. The ratio is 65% below the 5-year trend, which will further place downward pressure on rates.

Spot rates declined for the second consecutive month, while contract rates dropped 3.4% in August. However, those rates are still 18% above the five-year trend and contract rates are 31% higher. Rates will likely continue to decline as the winter months are usually a slower season for flatbed freight.

The market forces for the flatbed sector appear strong overall as manufacturing new orders continue to remain elevated. Total manufacturing is 15.3% above the five-year trend.

Housing starts are rapidly declining, signaling a slowdown in the housing market. New starts have now dropped 20% since this year’s high in April. That’s still 3.8% above the five-year average. Houses under construction are also above the five-year trend.

Flatbed volumes and rates are expected to remain strong as consumers and businesses continue to purchase building materials, garden equipment, and supplies to dealers.

Reefer market

Like van and flatbed, the reefer market also saw a decrease in the load-to-truck ratio month-over-month, albeit at a smaller rate, decreasing by 2.2% to 7.08 loads to every truck in August.

Unlike van and flatbed, the reefer market is moving more sideways.

Both spot and contract rates dropped month-over-month, marking three straight months of decline for spot and two months for contract.

Volumes and reefer truck capacity loosened, applying downward pressure on rates. Retail sales for food services and drinking places mirror DAT’s Trendlines.

Overall freight market

Employment numbers remain strong, job openings continue to grow and quits remain elevated, reports the OOIDA Foundation.

Unemployment is 30% below the five-year trend, and truck employment increased to 1.595 million people, 6% above the five-year trend.

After measuring for inflation, durable goods increased for the third straight month and nondurable goods decreased for three straight months.

People are still purchasing goods despite the significantly high consumer price index.

Expeditor services, hot-shots, and general less-than-truckload continue to see strong rates.

The manufacturing data suggest that activity is still going strong even though total manufacturing might be peaking.

Exports and imports declined month-over-month, but is more in line with seasonal and pre-pandemic trends.

Containerships are still bunching up even as ports around the country strive to become more efficient.

Lastly, the intermodal industry continues to struggle with service issues. This could be catastrophic in the unlikely event of a rail worker strike.

The Foundation announced in July it would began providing a monthly Market Update to allow OOIDA members to gain insight on what is happening in the market as well as get a clear picture of what to expect going forward.

The full OOIDA Foundation market update can be viewed here. LL

More business news is available on LandLine.Media.