U.S. truck freight market sees quarterly decline in shipments and spending
by February 21, 2024 8:45 am 889 views
The U.S. truck freight market declined in the last three months of 2023 as shipments and spending fell from the third quarter of last year and the fourth quarter of 2022, according to a new report. The market remained soft in January.
The newest U.S. Bank Freight Payment Index shows national shipments and spending declined quarterly and year-over-year for the fourth consecutive quarter in the fourth quarter of 2023. The market was impacted by a combination of consumer spending changes, a decelerating economy and retailer priority of inventory reduction.
The Southeast region, which includes Arkansas, experienced double-digit quarterly decreases in shipments for only the second time since the second quarter of 2020. The regional decline was attributed to a drop in retail spending, which was affected by a combination of consumers spending more on experiences and a cooling labor market.
The shipments component of the U.S. Bank Freight Payment Index fell by 15.7% in the fourth quarter from the same period in 2022. It declined by 10.9% from the third quarter of last year. The index’s spending component decreased by 13.5% in the fourth quarter from the same period in 2022. It was down by 1.4% from the third quarter of 2023.
Excluding the sequential dip in spending, the fourth-quarter metrics comprised larger declines from the previous quarter and a year earlier compared to the third-quarter declines, the report shows. Macroeconomic growth moderated in the fourth quarter from the previous period, but it continued to outperform the freight market. Real gross domestic product (GDP) rose at an annual rate of 3.3% in the fourth quarter, down from a 4.9% increase in the third quarter, according to the Bureau of Economic Analysis. GDP is the market value of goods and services produced in the United States, and it rose to a record $27.93 trillion in the fourth quarter, up from $27.61 trillion in the third quarter, according to the Federal Reserve Bank of St. Louis.
The U.S. Bank report attributed the fourth-quarter freight volume softness to retailer inventory reductions over the period. According to trade group American Trucking Associations, the freight market softness continued into January.
ATA’s For-Hire Truck Tonnage Index fell by 3.5% in January from December. The index was down by 4.7% from January 2023, marking the 11th consecutive year-over-year decrease.
“January’s data was a snap back to reality for anyone thinking the freight market was about to turn the corner,” said ATA Chief Economist Bob Costello. “Bad winter weather in January likely hurt volumes, not to mention sharp drops in a number of drivers of tonnage including retail sales, housing starts and manufacturing output.”
According to the U.S. Bank report, carriers will benefit as inventories become balanced. Retailers and other businesses will need additional products to be delivered by trucks as inventories will need to be replenished.
Still, as shipment volumes decline, too many trucks are competing for too little freight. This leads shipping rates to decrease and carrier capacity to fall. According to DAT Freight & Analytics, dry van spot rates fell by 10.1% in January from the same month in 2023. As of the week ending Sunday (Feb. 18), the rates were down by 1.3% from the previous week. Large carrier truckload capacity has declined for six consecutive quarters and is now at about 2018 levels.
According to the U.S. Bank report, supply and demand might be moving closer to balance as spending only fell by 1.4% in the fourth quarter from the previous period. The smaller declines in spending, along with the larger declines in shipment volumes, “suggest that there were some reductions in freight capacity in the industry, keeping costs higher,” the report shows. “Motor carriers, especially those exclusively in the spot market, have been under tremendous pressure between falling freight rates and rising costs.”
The Cass Transportation Index Report for January showed shipments declined by 7.6%, and expenditures fell by 24.3% from the same month in 2023. The first year-over-year decline in the freight recession was more than two years ago, and amid the inventory destocking and rising goods consumption, “the downturn is likely nearing its end,” according to Cass. “The acceleration in real disposable incomes, supported by surprisingly sharp disinflation and the ongoing strong labor market, suggest freight demand fundamentals will improve in 2024.”