Cautious Optimism for US Freight Market

Economic and trucking industry analysts believe 2024 is looking up, especially in the second half of the year, after the U.S. economy stuttered along in 2023 toward a hoped-for “soft landing,” reports Truckinginfo.com.

The transportation analysts at Stifel recently reported that for public trucking company earnings, “last year represented the worst annual financial comps … since the [Great Recession] as the Pandemic-era ‘sugar rush’ to earnings came to a screeching, cyclical halt.”

Many fleet management teams overestimated their earning ability during what Stifel called “an unusually long trough.”

However, Stifel reported that truckload rates have returned to a pattern of normal seasonality after ticking up prior to the holidays, and barring any major economic disasters, it anticipates that pattern to continue.

Demand during the first half of 2024 is expected to be “generally sluggish, though stable,” Stifel said. “As a result, we think supply will be a greater near-term determinant of spot rates, and diesel prices will be a key indicator when monitoring capacity changes.”

The trucking industry analysts at ACT Research also believe U.S. freight cycle fundamentals will improve in 2024.

Freight demand is below trend, but starting to recover, as post-pandemic effects fade. Both real disposable incomes and retail sales are accelerating, ACT said, and disruptions in ocean shipping are likely catalyzing the end of the 18-month destock.

Global ocean shipping disruptions will likely change freight patterns and could bring more to trucking, especially intermodal.

“The two primary routes from Asia to the U.S. East Coast have been severely impacted by conflict in the Red Sea and low water in the Panama Canal,” Denoyer explained. “This is pressing freight to the west coast ports, where the intermodal network will likely experience strong demand, which will eventually flow into the truckload market.”

“Real retail sales recently turned positive after a year of declines, and after 18 months of destocking, a restock is drawing near, spurred by ocean risks. Supply dynamics are also shifting as 2024 begins, setting up a new stage of the cycle. While partly temporary, the mid-January cold-related slowdown in rail volumes is already sparking truckload spot activity,” Denoyer added.

2024 may give the freight market a sense of the “new normal,” according to Motive’s first monthly economic report of the year.

“After three years of impacts from the pandemic and major external forces disrupting the freight market, 2024 may be the first time carriers will get a sense of what the new normal will look like,” Motive analysts said in the report. “Retailers are re-stocking inventories again, potential interest rate cuts could mean better access to capital, and consumer demand could be less volatile if inflation keeps cooling.

“While we will likely continue to see overall contraction of the freight market, we expect that 2024 will be less volatile, creating more predictability in freight and inventory planning.”

DAT Freight & Analytics reported that spot truckload rates rose in December and the gap between spot and contract van rates closed to its narrowest point since March 2022, when prices to move truckload freight were near all-time highs.

Full article here.

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