VOLUME INDEX: 
The Volume Index weakened further in April, at 37.6 (SA) versus 44.6 in March. Destocking contributed to the softness, although the 24% y/y decline in container imports in Q1 likely represents the worst of the destocking. A slowing in destocking would be a positive for volumes. Inflation, while showing tentative improvement, continues to gnaw at consumer spending power, with retail sales in real terms down 3.6% y/y in April. The slow start produce season may also be a headwind.
As illustrated, a normal trucking freight cycle includes two-plus years of growth followed by about 18 months of retrenchment. The Volume Index has been below 50 for 11 of the past 13 months. While the near-term outlook remains cautious, imports should begin to recover soon. If this cycle is like the last two, demand growth will return in 2024, perhaps even late 2023.
.png?width=550&height=397&name=ACT%20For-Hire%20Trucking%20Index%20Freight%20Rates%20(1).png)
PRICING INDEX:
The Pricing Index’s slide continues, falling 2.7 points to 33.4 in April (SA) from 36.1 in March. This is the second lowest reading in the index’s history, with only April 2020 being lower. Astute respondent feedback said this is among the most challenging markets of a multi-decade career, and “only the strong survive!” We believe the cure for low prices is low prices, and since October 2022 the Department of Transportation (DOT) has revoked a net 11k operating authorities.
While the pricing pendulum remains with shippers for now, the next capacity rebalancing has begun. With capacity slowing and set to decline later this year, rate trends should begin to recover as soon as traction on freight volumes is established.
CAPACITY INDEX: .png?width=550&height=400&name=ACT%20For-Hire%20Trucking%20Index%20Fleet%20Capacity%20(1).png)
The Capacity Index ticked down by 0.8 points m/m to 51.8 in April, still growing, but at a slower rate than in 2022. Improvements in equipment production and drivers, due to improvements in the supply chain and drivers seeking safe harbor in larger fleets, helped grow capacity for the past 18 months. We expect capacity growth to keep slowing, but it may remain relatively steady as the fleets in our survey are mainly medium and larger TL carriers, where orders for new equipment remain sticky after nearly two years of being on allocation.
Equipment production improved steadily throughout 2022, and OEMs are building at essentially full capacity in 2023. So far, demand remains strong as elevated replacement demand persists, but we expect capacity growth to slow on lower capital spending, following lower rates, as evident in our fleet purchase intentions number below.
DRIVERS:
The Driver Availability Index was flat month to month, at the record level of 60.3. The index clearly shows a loose market as drivers continue to seek safety from falling spot rates in the seats of larger, well-capitalized fleets. As our survey sample is comprised of mainly medium and large TL and LTL fleets, results are likely overstated from the broader market, as these fleets act as safe havens from a rough spot market.
Longer-term challenges to driver availability will persist, such as the retiring baby boomer demographic, resulting weak US labor force growth, and the FMCSA Drug & Alcohol Clearinghouse. Lower spot rates and rising drug test failures should help tighten the driver market in 2023. For context, about 3% of the driver population potential is currently in prohibited status due to drug test failures.
FLEET PURCHASE INTENTIONS: .png?width=550&height=400&name=ACT%20For-Hire%20Trucking%20Index%20%25%20Respondents%20Buying%20Equipment%20Next%203%20Months%20(2).png)
Buying intentions increased m/m in April, with 50% of respondents intending to purchase equipment in the next three months, but after an elevated 2022 due to pent-up demand, softer freight volumes and weaker rates will likely cause fleets to reduce buying intentions through the first half of this year, potentially slowing capacity growth in 2H’23, but more likely in 2024. This month’s reading is below the 57% historical average.
Replacement demand remains elevated following the capacity constraints of the past couple of years, with average fleet ages still higher than many fleets would prefer. Still, significantly lower contract rates should keep pressure on this index for some time.
%20Index%20Less%20Capacity%20(Supply)%20Index.png?width=550&height=400&name=ACT%20For-Hire%20Trucking%20Index%20Supply-Demand%20Balance%20Freight%20(Demand)%20Index%20Less%20Capacity%20(Supply)%20Index.png)
SUPPLY-DEMAND BALANCE:
The Supply-Demand Balance loosened further in April, at 35.8 (SA) from 42.0 in March, largely due to the m/m decline in volumes, but the slight downtick in capacity also added to the looser reading. April marked the fourteenth consecutive underwater point in the series. For context, in the 2015-2016 downcycle, the Supply-Demand Balance was loose for 17 of 19 months. While conditions remain loose, the seeds have been sown for a rebalancing.
The cyclical reaction to the historically strong (and long) cycle of mid-2020 through early 2022 has been a historically sharp downturn. But less equipment capacity was added during the upturn, and the sharp downturn has caused a record number of marginal fleet failures, so capacity is starting to tighten. And though demand is soft amid significant retail inventory destocking, consumer fundamentals are starting to recover, and destocks are inevitably followed by restocks.
PRODUCTIVITY INDEX: 
(miles/tractor)
Fleet productivity increased 6.1 points m/m, to 46.0 in April (SA), but remains below the 50 mark which would indicate improvement.
Lower freight volumes and better equipment availability put downward pressure on productivity, and with equipment replacement likely to remain elevated, productivity may remain soft. But productivity could find support if inventory destocking slows and volumes increase, and as capacity growth slows.
The index is well below the long-term average of 53.9, as volumes have fallen and the driver population has risen considerably in the past two years.