U.S. freight volumes fall to lowest levels in 9 years

Fourth-quarter freight shipments fell to the lowest levels since the first quarter of 2014 as consumer spending continued to shift to services, from goods, according to a new report.

The U.S. Bank Freight Payment Index report for the fourth quarter of 2022 shows that shipments declined by 7.1% from the same period in 2021 and by 4.6% from the third quarter of 2022. Meanwhile, freight spending rose by 1.8% in the fourth quarter from the same period in 2021. The spending fell by 0.2% from the third quarter.

According to the report, the trucking market continued to soften, especially regarding freight volumes. Rising interest rates have impacted goods consumption as many large purchases, such as vehicles and homes, are rate sensitive.

Consumers are spending more on services, including entertainment and travel, than during the COVID-19 pandemic when rising goods spending boosted freight volumes. Higher inflation also has affected consumer goods demand.

Though freight spending narrowly fell in the fourth quarter, the average diesel fuel price also declined. However, contract freight rates remain stable, indicating that industry capacity is likely falling. Some capacity, including small and very small carriers, is likely leaving the market as cost pressures remain high amid lower spot market volumes and rates.

According to DAT Freight & Analytics, spot rates for truckload van and temperature-controlled freight increased in December, from November. It was the first month-over-month increase since January 2022. Severe weather and a late surge in holiday goods contributed to the freight demand.

“There was a peak season for truckload freight,” said Ken Adamo, DAT chief of analytics. “It just arrived later than usual and with many of the variables you’d expect in December, from winter storms to a rush of retail sales boosted by last-minute deals for holiday shoppers. To borrow a football term, sometimes you have to let the play develop and not count out a season or freight cycle.”

According to DAT, truckload van spot rates are down by 23% in January from the same month in 2022. The rates fell by 1.1% in January from December. Capacity tightened at the end of January, stemming some of the declining rates on the spot market.

“December showed that seasonality is coming back to truckload freight,” Adamo said. “In your 2023 playbook, expect a slow January and February for spot freight volumes, which is consistent with previous years — at least, years that don’t include a Polar Vortex or pandemic.”

In December, the American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index rose by 0.4%, from November. For 2022, the index increased by 3.4%, the largest gain since 2018. The index largely comprises contract freight as opposed to spot market freight.

“Despite the small gain in December, for-hire truck tonnage clearly decelerated during the final quarter in 2022,” said ATA Chief Economist Bob Costello. “In fact, tonnage outperformed some other key metrics that drive truck freight, like housing starts and factory output during the final month of the year. This is probably because contract truckload freight is still outperforming the spot market and less-than-truckload freight after underperforming both of those sectors in 2021.

“Despite weakening in the second half, 2022 overall was a solid year for truck freight tonnage,” Costello said. “The index’s yearly gains were primarily driven by strength in the first half of 2022, so despite a marked slowdown as the year ended, for the year as a whole, tonnage posted a very solid year overall.”

Meanwhile, the U.S. Bank Freight Payment Index has declined in four of the past five quarters. The fourth-quarter shipments decline from the third quarter was the largest sequential decrease since the first quarter of 2021. And the year-over-year decline was the largest since the third quarter of 2020 amid the pandemic.

While household spending on goods has fallen, housing activity has declined also. Decreases in new home construction and existing home sales have affected freight volumes. Also, manufacturing activity has slowed, creating another headwind for freight volumes.

The Southwest region was the only U.S. region in which shipments rose from the third quarter. Shipments in the region rose by 0.4% in the fourth quarter from the previous period. Compared to the same period in 2021, shipments in the region were up by 6.3%. Energy production, cross-border trade with Mexico and Texas port activity were attributed to the freight volume rise.

Meanwhile, shipments in the West region fell by 10.6% from the third quarter. In the Southeast region, which includes Arkansas, shipments fell by 1.4% from the third quarter and were down by 10.4% from the same period in 2021. Weaker housing activity affected freight demand in the region. In November, new housing starts in the region declined by 16.7% from the same month in 2021.

Still, shipper spending on truck transportation in the Southeast region rose by 2.7% in the fourth quarter from the previous period and was up by 4.4% from the same period in 2021. The spending has risen in five of the past seven quarters, and the year-over-year rise in the fourth quarter was the second largest among the five U.S. regions. According to the report, the divergence between shipments and spending suggests that capacity in the region tightened.