Outlook concerned in latest OOIDA Foundation release

February 24, 2023

SJ Munoz


The OOIDA Foundation’s future outlook was labeled as concerned in its January Market Update.

The Foundation update also says volume and demand are flat and capacity is very loose, while rates are bottoming and operating costs are high.

Below is a closer look by specific market.

Van market

The load-to-truck ratio decreased in January as it moves back to typical seasonal patterns. The 12.8% decrease month-over-month makes the ratio 68% lower than January 2022, and 23% below the five-year trend.

Rates are also following the seasonal trend with both spot rates and contract rates decreasing.

However, both remain above the five-year trend.

In terms of the retail and consumer price index, people are still purchasing goods, but at a slower pace. Retail trade increased month-over-month, but the consumer price index dropped slightly. The consumer price index remains higher than a year ago, and above the five-year trend, but growth year-over-year is slowing.

Inventory-to-sales ratios have grown while monthly sales have stalled. Inventories will need to decline before demand picks back up.

Flatbed market

Load posts have been rising but are still significantly lower than this time last year and half of what they were in 2018. Equipment posts are at the highest level that they have been in seven years.

The load-to-truck ratio increased for the second consecutive month. That ratio is still 64% below the five-year trend.

DAT predicts spot rates, excluding fuel, will continue to strengthen heading into the spring. The spread between contract and spot is 71 cents.

Total construction spending saw a decrease, while spending on highways and streets increased month-over-month.

Housing starts moved downward for the fifth consecutive month.

Sales of building materials, garden equipment, and supplies dealer increased to $6.7 billion above the five-year trend.

Flatbed volumes look to steady ahead of the spring construction season.

Reefer market

A downward trend in demand continues after an increase of almost 15% in December.

Load posts are more than three times lower than this time last year. Truck posts with refrigerated trailers have also declined, but equipment posts are still the highest they’ve been in seven years.

Spot rates moved downward and contract rates dropped. DAT is forecasting spot rates excluding fuel will remain mostly flat into March.

Produce season doesn’t officially start until April.

Fruit and vegetable reefer rates are 20% below the January 2022 high. The beginning of the year marks one of the slowest season for reefers until spring.

Food service and drinking places sales increased month-over-month and year-over-year. They are also 39.5% higher than the five-year trend.

Yet, spot rates continue to fall due to an excess in reefer truck capacity and fewer volumes overall.

Trucking market

The Transportation Service Index dropped for the second consecutive month and for the fourth time in eight months.

Seasonally adjusted increases in trucking, air freight and pipeline resulted in a rise in freight volumes in December.

The Cass Shipment Index was flat month-over-month and down year-over-year because of a tough comparison.

Cass believes the bottoming process for the freight rate cycle has accelerated with spot rates further below operating costs than ever before.

New Class 8 orders were down for the fourth consecutive month, allowing used sales to surpass new sales for the first time since April 2022.

This is a good sign as the industry attempts to correct for the excess capacity that has flooded the market for the past several months.

The Logistics Managers’ Index increased as firms begin to restock their products after nine months of trying to reduce inventories.

In addition, transportation prices increased for the first time in seven months.

As the slowest time of the year for freight begins, the Producer Price Index expectedly decreased.

Rates will likely continue to slide downward until spring. There may be a bump in rates for certain sectors in February.

Fuel prices dropped for the second consecutive month. However, the Foundation says it’s still a good time to incorporate a fuel surcharge.

Used truck prices are still elevated, but they dropped for the 10th consecutive month to $75,600.

We expect truck prices to continue to decline as larger carriers push to replace their fleets and demand wanes.

Overall freight market

Truck employment increased month-over-month, is 3.7% higher year-over-year and 6.2% above the five-year trend.

Wages and salaries are also higher, which has kept disposable income and sales elevated.

Durable and nondurable goods decreased for the second consecutive month.

New orders manufacturing increased and total manufacturing rose month-over-month.

Census Bureau data suggests manufacturing activity is still strong.

The machinery wholesaler inventories-to-sales ratio are climbing rapidly, helping to depress demand and lower rates.

Exports and imports saw a decrease with indications that a rough stretch could follow.

Ports continue to be less congested with containerships awaiting berth overall dropping 89% since January 2022.

Railcar loads are sliding downward as intermodal containers and trailers remain relatively flat.

The full OOIDA Foundation January Market Update is available here. LL

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