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VOLUME INDEX:
The Volume Index decreased 4.9 points in November to 52.0, seasonally adjusted (SA), from 56.9 in October. The spike last month was likely caused by a surge in demand following hurricanes and the brief ILA port strike, but overall, the US economy remains resilient, and freight volumes are growing. Consumers continue to buoy the economy, and for the first time in six quarters, retailers’ inventories are starting to outpace sales after considerable destocking. The looming ILA strike in January and threat of tariffs are likely to pull freight forward, but opaqueness regarding the timing and scale of tariffs may reduce the amount of pre-tariff shipping. While the retail sector is healthy, interest rate sensitive sectors like manufacturing and construction are sluggish. Continued tight financial conditions are likely to slow some volume improvement.
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PRICING INDEX:
The Pricing Index decreased 3.6 points m/m in November to 51.6 (SA). Similar to the spike in volumes, October’s better result was likely influenced by one-time factors. Freight volumes are already growing, and the potential of a freight pull-forward in early 2025 is likely to provide some temporary pricing relief in the for-hire market.
The larger issue, and one we’ve repeated ad infinitum this year, is private fleets continued capacity additions. Until private fleets slowdown insourcing, the for-hire market will remain hamstrung with lower, and a more gradual improvement in, rates.
While we see modest positive momentum for freight rates in the coming months, the lack of downturn in equipment sales to date suggests the expected modest recovery looks further away.
CAPACITY INDEX: .png?width=550&height=389&name=ACT%20For-Hire%20Trucking%20Index%20Fleet%20Capacity%20(1).png)
The Capacity Index rose 0.3 points m/m to 50.0 in November, from 49.7 in October. After two years of weak profitability, for-hire carriers aren’t in the position to add significant new capacity. Given the current volume and rate environment, we would anticipate for-hire capacity additions to remain at replacement levels, leaving the index at around current levels.
The issue remains private fleet expansion, which we suspect were the driving force behind the November surge in Class 8 tractor orders. If private fleets continue to expand, meaningful recovery in for-hire will only move further down the road.
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DRIVERS:
The Driver Availability Index decreased 2.8 points to 52.8 in November, from 55.6 in October. Over the past 14 months, the index has moved in a narrow range of “easy” readings.
November marks the 30th consecutive month the index has been at or above 50. Driver availability remains persistently elevated and far from shortage, partly supported by the large increase in pay during the pandemic and by the rise in migration since. Driver availability may fall on the margins as the FMCSA closes a loophole in the Drug & Alcohol Clearinghouse, tightening enforcement. Based on our survey results last month, fleets are doubtful it will have much of an impact.
A tightening in the driver market, which could come from the long cyclical lag from lower rates, the baby boomer retirement wave, or mass deportations, would press truckload rates higher.
FLEET PURCHASE INTENTIONS: .png?width=550&height=389&name=ACT%20For-Hire%20Trucking%20Index%20%25%20Respondents%20Buying%20Equipment%20Next%203%20Months%20(1).png)
Fleet purchase intentions were essentially flat m/m, with 60% of respondents planning on buying new equipment in the next three months, above the 56% historical levels for November. Rising intentions may reflect cautious optimism in the for-hire market, or perhaps greater optimism following the election. Improving volumes have likely helped improve equipment purchase intentions, but with net margins under pressure the past two years, equipment demand will likely hold at around replacement levels. A significant consideration is whether private fleets will continue to aggressively add capacity in 2025.
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SUPPLY-DEMAND BALANCE:
The Supply-Demand Balance grew more slowly in November to 52.0 (SA), from 57.2 in October, as freight volumes decreased and fleet capacity inched higher.
Private fleet expansion, which is not captured in this indicator, has resulted in a longer period with the market close to balance than in past cycles. Disinflation and lower interest rates will support the consumer outlook, as rising goods demand and a turning inventory cycle have resulted in improved import volumes. Private fleets are handling an increased share of volumes, which has been the sticking point keeping the for-hire market from turning up. A slowdown in private fleet growth is necessary for further improvement in the for-hire market balance.
PRODUCTIVITY INDEX: .png?width=546&height=387&name=ACT%20For-Hire%20Trucking%20Index%20Productivity%20(1).png)
(miles/tractor)
Fleet productivity decreased 4.5 points m/m to 47.6 (SA) in November on lower volumes and an increase in capacity. In general, productivity has been challenged by private fleet pressure in the for-hire market but should improve with volume increases and capacity decreases.