Trucking industry report shows challenges linger in third quarter

The truck freight market continued to decline in the third quarter as carriers exited the industry, according to a new freight report. For the third consecutive quarter, U.S. freight shipments and spending decreased quarterly and year-over-year.

The third-quarter U.S. Bank Freight Payment Index report shows the truck freight economy continues to face several headwinds, including consumer spending on experiences over goods, a softer housing market and declining factory output. The U.S. Bank National Shipments Index fell by 9.7% in the quarter from the same period in 2022. It was the sixth-consecutive and the largest year-over-year decline since the 12.5% drop in the second quarter of 2022 at the start of the COVID-19 pandemic. The U.S. Bank National Spend Index fell by 12.5% in the third quarter from the same period in 2022.

Compared to the second quarter, third-quarter shipments and spending fell by 3.4% and 4.2%, respectively. Both shipments and spending have declined for five consecutive quarters.

The report shows the combination of declining freight volumes and falling rates because of weak demand resulted in shippers spending less on truck freight. While shippers have benefited from lower spending, carriers have not. Fleets are exiting the marketplace, and this could impact the supply and demand balance in the coming quarters.

According to DAT Freight & Analytics, dry van spot rates declined by 13.6% in October from the same month in 2022. Rates fell by 1.1% in October from September. As of the week of Oct. 29, rates decreased by 0.1% from the previous week.

According to the Stephens Truckload Rate Index report, third-quarter truckload contract rates declined by the low teens in the third quarter from the same period in 2022. Over the same period, trucking revenue fell by 8.9%. The index measures trucking revenue per loaded mile, excluding fuel.

The Stephens report shows that freight volumes are expected to improve in 2024 largely because retailers will resume more normal reordering patterns. Carriers said customers have a better position on inventory after more than a year of de-stocking. Still, freight volumes have yet to improve “in a meaningful way due to concerns around decelerating consumer spending and/or continued slowing in the industrial economy.”

According to the Stephens report, equipment production and driver hiring improved over the past year and led the truckload market to have too much capacity. “With spot market rates tracking in line with 2019 levels, but many expense categories (equipment, driver wages, maintenance, etc.) materially higher, we have begun to see modest capacity attrition mainly from smaller fleets and individual owner-operators. We believe a material acceleration in capacity attrition is necessary to drive a more balanced market by mid-2024, but we think this is possible especially given the increasingly challenging operating conditions in the (truckload) market as fuel prices rise.”

The Stephens report also shows carrier rates are expected to be stable or improve slightly in the fourth quarter as many truckload carriers are more “willing to walk away from freight rather than take any more rate decreases. We also expect more favorable short-term contracts and increased spot activity could provide a slight seasonal lift in (the fourth quarter), though we would note peak season demand and rates are expected to be very muted given the ease of sourcing capacity in this oversupplied market.”

In a third-quarter report, analysts Garrett Holland and Joseph Higgins, both of Baird, said third-quarter “results were rough, and trends likely do not significantly improve in (the fourth quarter) or (the first quarter) unless demand firms. The challenges and duration of the freight recession to date have meaningfully corrected excess inventory and capacity though, eventually setting up the next cycle.”

In the third quarter, Lowell-based carrier J.B. Hunt Transport Services Inc. reported earnings declined by 30.4% to $187.43 million from $269.38 million in the same period in 2022. Revenue fell by 17.6% to $3.16 billion from $3.83 billion.

Tontitown-based carrier P.A.M. Transportation Services Inc. reported earnings fell by 75.2% to $6.09 million in the third quarter from $24.56 million in the same period in 2022. Revenue decreased by 20.2% to $201.5 million from $252.63 million.

“The third quarter of 2022 was one of the best in our company’s history, while the third quarter this year was faced with an unprecedented unfavorable truckload market,” said P.A.M. President Joe Vitiritto in the earnings report. “Despite market challenges, we did see improvement in factors that we believe will position the company favorably when truckload market conditions improve.”