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MAY 2023 FREIGHT FOCUS

US Freight Cycle Near Bottom as Capacity Begins to Tighten

 

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“The intersection of additional volume and tightening capacity underpins our forecast for a near-term bottom in spot truckload rates. We’ve been expecting the bottom roughly around this month since we introduced 2023 spot rate forecasts 16 months ago, and we still think Roadcheck this week will help usher in a new freight cycle.”

-Tim Denoyer, VP & Sr. Analyst

ACT's Top 5 Freight Focus - May 2023

1. The shipments components of the Cass Freight Index® fell 2.4% y/y in April as freight markets remain muted and continue to work through an extended soft patch. 

2. ACT Capacity Index ticked up by 0.6 points m/m to 53.6 in March, but still indicates slower growth.

3. Operating Authorities are declining at a record rate. There was a six-month period in 2009 with 3,300 net revocations, and 7,700 in three months in 2013. Those periods weren’t preceded by the same capacity additions as the past two years, but since October 2022, DOT has revoked a net 11,000 operating authorities. These exits are unlikely to let up until rates begin to rise. 

4. Aggregated DAT contract rates were trending toward a 15% y/y decline.

5. US dry van truckload (TL) spot rates, net fuel, fell 6₵ m/m in April to $1.61 per mile, 5₵ below normal seasonality.

 

DOT Operating Authorities - May

The freight cycle remains clearly weak, according to the latest release of the ACT Freight Forecast, U.S. Rate and Volume OUTLOOK report, but there are rays of light at the end of the tunnel. ACT sees the tightly intertwined supply and demand dynamics in the freight market beginning to recover with demand fundamentals improving and capacity starting to tighten. 

“With produce season arriving late this year and the freight market likely passing the peak of the destock, freight demand is near the bottom,” shared Tim Denoyer, ACT Research’s Vice President and Senior Analyst. “With inflation easing, improving real income trends will allow for a bit more holiday spending this year, when even less destocking will mean more freight volume.” 

Regarding fleet capacity, Denoyer added, “Interstate operating authorities are contracting at a record rate, with about 11,000 net revocations since last October, including about 1,600 net revocations in April. Total revocations were about 10,800 in April, near record levels, though grants and reinstatements are also elevated. This is beginning to tighten capacity, which will also help spot rates find the bottom and begin to rise.” 

He continued, “Long-distance trucking employment is also contracting, as long-haul trucking jobs declined by 8,700 jobs in Q1’23, or 1.0%. While still up 3.0% y/y in that latest March data point, the series will be down on a y/y basis by June on its current level. Since trends in employment follow trends in freight rates, long-haul jobs are set to decline this year.”

Denoyer concluded, “The intersection of additional volume and tightening capacity underpins our forecast for a near-term bottom in spot truckload rates. We’ve been expecting the bottom roughly around this month since we introduced 2023 spot rate forecasts 16 months ago, and we still think Roadcheck this week will help usher in a new freight cycle.”

The monthly 58-page ACT Freight Forecast report provides analysis and forecasts for a broad range of U.S. freight measures, including the Cass Freight Index, Cass Truckload Linehaul Index, and DAT spot and contract rates by trailer type. The service provides monthly, quarterly, and annual predictions for the TL, LTL, and intermodal markets over a two- to three-year time horizon, including capacity, volumes, and rates. The Freight Forecast provides unmatched detail on the freight rate outlook, helping companies across the supply chain plan with greater visibility and less uncertainty.

Tim Denoyer HeadshotTim Denoyer,

VP & Senior Analyst

 

 

 

 

 

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Key Items Covered Monthly In the ACT Freight Forecast:

  • ACT Class 8 Tractor Sales Forecast
  • Cass Shipment Index Forecast®
  • Cass Truckload Linehaul Index® Forecast
  • DAT Dry Van Spot Rate Forecast
  • DAT Refrigerated Spot Rate Forecast
  • DAT Flatbed Spot Rate Forecast
  • LTL Tonnage and Yield Forecast
  • Intermodal Load and Rate Forecast
  • U.S. Economic Forecast

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