The ACT For-Hire Trucking Index is a monthly survey of for-hire trucking service providers. ACT Research converts responses into diffusion indexes, where the neutral or flat activity level is 50.
The Volume Index increased 2.3 points in February to 52.3, seasonally adjusted (SA), from 50.0 in January. The US economy continues to surpass expectations, and with goods prices now declining, retail sales are likely to recover in the coming months. Supporting the retail recovery is solid real income growth, a strong job market, and the end of the post-pandemic services boom. And after an 18-month destock, signs point to a restock beginning. Total North America imports were up 10% y/y in January, led by the West Coast. Additionally, industrial and construction activity are likely to play a role in the freight demand recovery, as nearshoring and government policies spur large project activity.
The Pricing Index rose 2.6 points in February to 46.1 (SA), as the freight market continues to gradually rebalance. The broader contract market continues to favor shippers for the time being; though, spot rates in general have been steady for almost a year but remain under pressure from private fleet capacity additions. The most recent Class 8 order and sales data continue to show capacity additions, which could slow the recovery in rates.
Though fleet capacity growth is delaying the recovery in rates, the improving supply/demand balance suggests the worst is in the rearview, and the cyclical recovery should continue.
The Capacity Index decreased by 1.1 points m/m to 48.7 in February. The decrease continues to reflect the tight spot many for-hire fleets are in, with low rates and higher costs eating into profitability. As such, for-hire capacity has contracted for the past eight months, and with many large fleets lowering capex budgets in 2024 and delaying additions, capacity declines are likely to continue.
However, capacity is still being added industry-wide by private fleets. While US Class 8 tractor sales have slowed in recent months, sales in January and February remained above replacement levels, but they have declined significantly from record 2023 levels, reducing overall capacity additions and downward rate pressure.
The Driver Availability Index remained at 55.4 in February. The resilience may be partly seasonal, with volumes still soft (note we have not yet seasonally adjusted this index), so the index may decline seasonally in Q2.
Downward pressure should resume as driver availability has a long cyclical lag, and higher-paying construction and manufacturing jobs should provide more competition for drivers this year. Competition from higher-paying private fleets is also likely to press driver availability lower. Baby boomer retirements should continue, but our survey also found drivers delaying retirement because of the recent surge in inflation. One even noted some of their best “runners” are past retirement age.
Fleet purchase intentions decreased m/m to the second lowest February reading on record, with only 32.0% of respondents saying they plan to buy equipment in the next three months, compared to the 56.0% historical average. Simply put: truckers don’t buy trucks when they aren’t making money. The low profitability environment has resulted in many large fleets cutting capex budgets by as much as 30-40%, with some even delaying equipment purchases. When rates improve, purchasing sentiment should follow.
The Supply-Demand Balance increased in February to 53.5 (SA), from 50.2 in January, as capacity decreased and volumes increased. This marks the seventh consecutive month in which the Supply-Demand Balance has turned positive mainly on capacity contraction, but improving volumes have also contributed, which should continue. Recent green shoots suggest an improving market balance in 2024 after 18 months in a loose market, similar to the 2015-2016 downcycle, when the Supply-Demand Balance was loose for 16 of 19 months.
After a historically sharp downturn, cyclical dynamics are beginning to improve, albeit from low levels. With improving goods demand and inventory fundamentals (loaded imports +25% y/y at LA and Long Beach ports in the six months through February), we expect gradual improvement to begin to push freight rates higher soon, but the market may remain relatively balanced amid elevated capacity additions.
(miles/tractor)
Fleet productivity rose 8.6 points m/m, to 56.0 in February (SA), as better weather allowed for an improvement in volumes.
“Very encouraging commentary from a couple of the fleet CEOs on freight mix. They’re not getting higher rates yet, but they’re able to choose a little bit more. And that’s different. That’s a change in the market I think was really important to hear and probably a leading indicator of better freight market conditions in the next few months.” - Tim Denoyer
After attending ACT Research's Market Vitals: The Current and Future Health of the Market Seminar 70 on February 21-22, David Spencer from Arrive Logistics and Tim Denoyer from ACT Research reflected on the current freight market and what the trucking industry can expect over the next six months and beyond.
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