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 decreased 5.5 points in June to 48.9, seasonally adjusted (SA), from a Roadcheck-assisted 54.4 in May. Volumes have been fairly flat this year, but they’ve improved to “less worse” on a y/y basis, with the index averaging 48.8 through the first half of this year, versus 42.8 last year. Even with consumers under strain, real US retail sales are up 1.8% ytd, and further disinflation helps support our outlook on real income growth. Additionally, intermodal and import volumes are trending positive, which minimally adds to overall surface freight volumes. Private fleet insourcing has likely taken away some for-hire demand, but the recent softening in US Class 8 tractor sales indicates a slowing in private fleet growth.
Overall, truckload volume data remain mixed, with the Cass Freight Index® and DAT spot loads still at cycle lows.
The Pricing Index ticked down 0.6 points in June to 47.9 (SA), remaining at close to neutral levels as freight rates continue to hover just above cycle low levels. Excess capacity additions by private fleets have extended this down cycle to the longest on record, as the scarring they incurred during the pandemic changed their tune on equipment purchases. CL8 retail sales have slowed, but it could still be few months before sales fall below replacement levels. At the margin, lenders are loathe to call loans back on equipment and put valuation losses on their books, keeping capacity in the market that should be gone.
The market rebalancing continues with spot rates, as capacity additions by private fleets and their recent efficiency gains weigh on for-hire fleet profitability.
The Capacity Index increased by 3.6 points m/m to 49.3 in June, from 45.6 in May. This month’s reading marks the 12th month in a row capacity has declined, the longest streak since the inception of the survey in late 2009. Fleet capacity contractions occurring at a slower rate suggest the supply-demand balance between the fleet and freight is narrowing. Given the duration of this downturn and the still-weak fundamentals, it’s hard to see capacity turning positive in the coming months, especially as the US tractor sales trend continues to sag.
US Class 8 tractor orders softened further in June, indicating that tractor fleet growth—the main reason why this cycle is the longest on record—may soon be coming to an end, though further declines are needed for capacity to start tightening.
The Driver Availability Index decreased to 50.0 in June, from 52.9 in May. Driver availability remains persistently elevated and far from a shortage, perhaps supported by older drivers sticking around to help with higher living costs, perhaps by the rise in migration, or maybe all the CDLs that were issued during the pandemic. The ongoing looseness in this index suggests that further driver exits remains to be seen. A tightening in the driver market would help to spur the recovery in rates.
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.
Fleet purchase intentions improved off last month’s lowest ever reading, with 32.5% of respondents in June saying they plan to buy equipment in the next three months, still remaining well below the 55.3% historical average. Low profitability resulting in lower capex budgets in 2024 has hamstrung fleets’ ability to buy equipment. When rates improve, purchasing sentiment should follow.
The Supply-Demand Balance fell in June to 49.6 (SA), from 58.7 in May, as freight volumes decreased and fleet capacity increased. Private fleet expansion, which is not captured in this indicator, is resulting in a longer leadup to higher market rates than in past cycles. With capacity an issue, overall equipment purchasing trends will remain key to watch. Continuing demand-side freight growth should provide ongoing support to the market balance.
Despite recent pullbacks, which were partly temporary, improving cyclical dynamics continue. Rising consumer goods demand and a turning inventory cycle are leading to strong improvements in imports and intermodal volumes, offsetting weakness in the interest rate-impacted housing market. At the heart of current for-hire market challenges, the problem remains that much of the economic growth is being handled by private fleets who continue to add capacity in 2024, more than two years after the market balance turned.
(miles/tractor)
Fleet productivity fell 6.5 points m/m to 48.5.0 (SA) in June, consistent with this month’s decline in the Volume Index. Productivity has been challenged by private fleet pressure in the for-hire market but will gradually improve with volume increases and continued capacity decreases.
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Key Items Covered Monthly In the ACT Freight Forecast: