May 26, 2023

Loaded and Rolling: No signs of 2nd-half freight recovery


May ‘State of Freight’ webinar points to no signs of 2nd-half recovery

(Source: FreightWaves)

On Wednesday, FreightWaves founder and CEO Craig Fuller sat down with Zach Strickland, FreightWaves’ head of freight market intelligence, to discuss freight market conditions and expectations. One key takeaway from the webinar involved questions over if there will be a second half of the year recovery in freight volumes. For the past few months, a consensus emerged from various analysts and executives that freight volumes, currently lagging behind pandemic highs, will tick upward and improve as inventory destocking completes and consumer spending rises. Fuller disagreed, arguing that consumer financial stresses such as inflation, upcoming student loan debt payment resumption, and less discretionary funds do not point to a meaningful increase in purchasing and a resulting freight volume improvement. 

Fuller said in the webinar, “I think what we have to be concerned about is that what drives the freight economy is good consumption. Goods are one of those things that if you think about discretionary spending, it’s the stuff that you pull back on. That’s the stuff that really matters in terms of freight demand. I just can’t make the case that there are any really bullish signs in the second half.”

Trucking equipment sales were another topic discussed, with both Strickland and Fuller noting a lack of pricing floor as used truck prices continue to fall. Large trucking companies typically place orders in the thousands as they replace aging equipment. Now that OEM order books and backlog-to-build ratios are improving, expect more used trucks being sold as fleets shed older tractors. 

Load boards, fraud and double brokering with Craig Fuller

(Source: FreightWaves)

On Tuesday, FreightWaves interviewed Fuller about his recent article highlighting problems with load boards, the impact of fraud and double brokering on their platforms. Fuller noted that instances of load board fraud rose over the past few years but accelerated in the past 12 months, with one reason being staffing decisions by freight brokerages. “The primary reason, if you think about the COVID cycle, a lot of freight brokerages went out and hired offshore call centers, offshore resources to scale up, was because that was the easiest way for them to bring on people to handle the volume of freight,” he said.

Fuller added that when the market slowed, those same brokerages trimmed offshore head counts, leaving many of these offshore freight brokers without work. The training in how to broker freight and use load boards can be repurposed by larger multinationals to commit fraud by hiring these jobless brokers.

Looking for solutions, Fuller advises taking inspiration from the financial system, where in the early days of online payment processing, large competing credit card companies and payment platforms adopted Payment Card Industry compliance methods to reduce fraud and create trust. For large load boards that operate like an oligopoly, adopting measures and unified protocols to verify carriers and brokers would be a major step in the right direction to increase trust on their platforms. According to TriumphPay, it’s estimated that at least $500 million of shippers’ and brokers’ freight goes to double brokers annually. 
You can find the entire interview here.

Market update: Consumer confidence falls in April

(Sources: The Conference Board; NBER)

April data by The Conference Board’s Consumer Confidence Index fell 2.6% month over month (m/m) from a reading of 104 in March to 101.3 index points in April as consumers fear a looming recession on the horizon. Consumer confidence indexes are a useful barometer to measure, as a perceived pullback in spending may translate into fewer purchases and lower inventory replenishment. Lower replenishment leads to lower orders and lower freight volumes. 

Ataman Ozyildirim, senior director of economics at The Conference Board, wrote in the report, “Consumers became more pessimistic about the outlook for both business conditions and labor markets. Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months. They also expect fewer jobs to be available over the short term. April’s decline in consumer confidence reflects particular deterioration in expectations for consumers under 55 years of age and for households earning $50,000 and over.”

While April data shows warning signs, according to preliminary data in May, the University of Michigan surveys of consumers noted further declines may be in store. The report’s index of Consumer Sentiment fell 9.1% m/m from 63.5 index points in April to 57.7 points in May. Joanne Hsu, director of consumer surveys, wrote in the report, “While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff.”

FreightWaves SONAR spotlight: Spot rates rise ahead of Memorial Day weekend

(Chart: FreightWaves SONAR)

Summary: Spot market rates are showing signs of life after falling for most of May. The FreightWaves National Truckload Index 7-Day average rose 3.76%, or 8 cents per mile, from $2.13 on May 15 to $2.21. This moving average was impacted by recent increases in the NTID, the daily version of the NTI with a week-over-week increase of 3.65%, or 8 cents per mile, from $2.19 on May 15 to $2.27. These increases reflect a muted return to seasonality in which the upcoming Memorial Day weekend sees spot market rates rise as truckload capacity returns home for an extended holiday weekend.

A question that remains is to what extent spot rates rise and whether a highly fragmented and revenue-starved carrier base can maintain a form of pricing discipline to extend these rate gains into the summer doldrums. According to the FreightWaves National Truckload Index Forecast 28-Day Outlook (NTIF28), spot rates are predicted to rise and plateau around $2.27 per mile by the end of May, with an expected nominal range of $2.25 to $2.27 per mile for the first half of June. While a plateau for spot rates is less than ideal for carriers, the bottoming out of spot market rates represents a Pyrrhic victory for the truckload capacity that remains available, after suffering losses and bankruptcies over the past year.

Weak truck market finally shows up in BMO transportation group’s quarterly report (FreightWaves)

Used truck prices: What was up has come down, way down (FreightWaves)

No seasonal uptick in May forces Landstar to lower guidance (FreightWaves)

A downbeat economy has left truck drivers facing a slowdown that could get worse than 2008 (Markets Insider)

How long does it take the freight market to flip? (FreightWaves)

Is the hybrid carrier the future of freight transportation? (FreightWaves)

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