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C-Suite Synopsis: Freight Transportation for September 2021

Posted by The FTR Experts on 9/30/21 2:28 PM

This c-suite synopsis of the transportation markets is provided to all of our Premium clients along with weekly transportation updates.

Headlines

TRUCKING: Market conditions are still robust for carriers despite some easing.

RAILCAR: The carload outlook remains little changed from last month, but the components of that growth saw some change.

INTERMODAL: Volumes declined sequentially in July as congestion across the supply chain weighed on loadings.

SHIPPERS: Market conditions have eased, but provide little relief for shippers.

Summary

The semiconductor shortage still looms over the economy with direct and indirect effects rippling through the industrial and consumer sectors. In July, auto makers tried to catch up on lost production by reducing or eliminating traditional shutdowns. That move distorted seasonally adjusted data to the upside in industrial production, manufacturing, and durable goods orders. However, severely depleted dealer inventories surely was the key factor in vehicle sales plunging in August to their lowest level since June 2020.

• Payroll job growth in August was weaker than expected at a gain of just 235,000 jobs after a two-month surge of about 2 million. Employment remains 5.3 million jobs, or 3.5%, below February 2020.
• Consumer spending ticked up 0.3% in July as services spending rose 1.0% and goods spending fell 1.1%. A decline in auto and light truck sales was a big factor.
• Supply chain disruptions and other factors have resulted in largely stagnant freight volumes, but capacity and productivity constraints are keeping rates for shippers high in all modes.

Tags: trucking, intermodal, Rail, C-suite, transportation

Trucking Sector

• Trucking conditions remain highly favorable for carriers with little sign of near-term changes. The Trucking Conditions Index has eased slightly from April’s record level, but it is still very strong.

• FTR’s truck loadings outlook for 2021 is slightly weaker at 6.0% growth, down from 6.3% previously. A stronger chemicals outlook mostly offset other major commodity groups that were slightly weaker. The 2022 truck loadings outlook is 3.3% growth.
• The outlook for active truck utilization is marginally weaker in Q4 due to softer freight but not enough to affect the market. Utilization is forecast above 98% through 2021 and above 96% through 2022, as driver capacity is expected to remain tight.
• For-hire trucking added 5,400 payroll jobs, season-ally adjusted, in August. Employment remains 26,300 jobs, or 1.7%, below February 2020. How-ever, some portion of the ongoing surge in new carriers represents a shift away from payroll jobs.
• Truckload rates are still forecast to rise nearly 18%in 2021. Spot rates still look to be 27% above 2020 levels while contract rate growth is forecast at about 13%. The 2022 forecast is basically flat with slight flatbed rate growth offsetting slight declines in the van markets.

Rail/Intermodal Sector

• Congestion remains a widespread issue across the intermodal supply chain, and it will limit volumes during the normal peak season. It is now expected that volumes will be at a peak plateau near present levels rather than showing further gains to a more traditional peak.

• Carload and intermodal volumes have remained fairly steady in recent weeks. Intermodal loadings are essentially inline with their five-year averages while carload is well below its five-year average.
• Coal represents two-thirds of the seasonal variance in carload markets, but it should get some support over the next few quarters as natural gas prices make coal more economic for domestic electric dispatch.
• Economically sensitive freight makes up the largest part of the remaining third of carload's deviation from the five-year trend. This includes all of the carload commodities except coal, agriculture, and petroleum, suggesting at least some weakness in sectors tied to the underlying economy.
• Automotive loadings are likely to remain weak through the end of the year as supply issues are unlikely to meaningfully change quickly.

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