OOIDA Market Update says rates are bottoming while costs are elevated

The OOIDA Foundation’s latest Market Update indicated volumes are flat, demand is slowing, capacity is very loose and rates are bottoming. In addition, operating costs are elevated.

As a result, the future outlook is restrained.

Here is OOIDA’s outlook by specific market.

Van market

The load-to-truck ratio increased month over month but is 53% lower than January, and 13% lower than the five-year trend. Time will tell if this growth is due to seasonal trends or if the market is starting to stabilize, according to the OOIDA Market Update.

Trucking capacity often tightens during the holiday season. This year, there was an increase in loads posted that pushed spot rates up while contract rates decreased.

Van spot rates are 4% above the five-year trend and contract rates are 24% higher. DAT expects rates to bottom out and bounce back around mid-February.

Goods are still being purchased despite inflation reports. However, retail trade decreased month-over-month. The consumer price index increased again and is 7% higher than one year ago. It’s also 12.7% higher than the five-year trend.

E-commerce, which represents nearly 15% of retail sales, increased to $265.9 billion. It is now 48% above the five-year trend.

The only retail sales to drop were from the electronics and appliance stores category, which has dropped 15.5% since peaking in June 2021.

Flatbed market

After eight consecutive months of decline, the flatbed load-to-truck ratio increased month-over-month. It remains 81% lower than this time last year.

Spot rates declined for the fifth consecutive month. Contract rates were also down following an unusual increase last month. The spread between contract and spot is 76 cents. DAT predicts rates won’t pick back up until mid-February due to the low number of housing starts as well as a slowdown in manufacturing activity last month.

Total construction increased, but spending on highways and streets decreased. This trend is expected to continue as usual throughout the colder months.

Housing starts declined for third consecutive month, and are 1% above the five-year average but down 16% year-over-year. Houses under construction stayed flat but are up 14% year-over-year. Completed houses jumped by nearly 11% month-over-month.

Advanced retail sales decreased due to special discounts offered by retailers to deplete their inventories during the holiday shopping season. Typical of the seasonal trend, flatbed volumes will decline in the winter months.

Reefer market

The reefer market reversed course following four months of decreases in load-to-truck ratio. That ratio increased by almost 15% in December. DAT continues to report a record number of equipment posts even as produce volumes have fallen due to historic droughts and flooding in California.

Spot rates increased in December but declined in January. Those rates are expected to decline again in February due to lower volumes in California and Florida.

Despite a small gain in December, fruit and vegetable reefer rates are 18% below their high in January. Rates are still 11.3% higher than the five-year trend.

The beginning of the year marks one of the slowest seasons for reefers until early spring.

Volumes dropped after a slight increase last month, while truck capacity tightened slightly as reefer truck availability rose.

Spot rates for food services and drinking places continue to fall due to an excess in capacity. This indicates the increase may be more because of inflation than volume.

Overall freight market

Employment numbers remain strong despite inflationary concerns. Job openings are strong, unemployment is 29% below the five-year trend and truck employment increased to 1.6 million people.

Durable and nondurable goods decreased after two straight months of increases.

Inflation is high, but wages and salaries are 7.2% higher year-over-year and 17% higher than the 5-year trend, which has helped to keep retail sales elevated.

Rates for expeditor services, hot-shots and general LTL are strong but have peaked. Rates in the LTL market should remain strong.

Manufacturing has decreased, but activity is still strong.

While not a large driver of freight movement overall, imports and exports both decreased. Ports continue to be less congested around the country. Containerships awaiting berth have dropped 74% since January 2022.

The full OOIDA Foundation Market Update can be viewed here. LL

More business news is available.