Overview
One of the biggest pieces of economic data this week mostly confirmed what we already knew, namely that strong vehicle sales in July greatly bolstered consumer spending.
We also learned that economic growth in the second quarter was slightly stronger than we thought due to consumer spending. Consumption has outperformed expectations, but the latest data hints at potential consequences down the road.
Other data suggests continued stabilization in trucking. The number of for-hire carriers losing authority in August was the fewest since April 2022, and the carrier population saw its largest net increase since September 2022.
Trucking
The number of trucking firms exiting the market in August was the fewest in more than two years, and more carriers entered the market than left, according to FTR’s analysis of Federal Motor Carrier Safety Administration data.
Revocations of operating authority net of reinstatements totaled 4,836, which is the fewest in a month since April 2022. Since then, carrier failures have averaged nearly 6,900 a month. Before May 2022, revocations net of reinstatements had never exceeded 5,000 in a month.
Meanwhile, FMCSA in August authorized 5,055 new trucking firms – a total that has been exceeded only twice since September of last year. Although new entry is running about half of what it was during the 2021 peak, it is high historically. In 2018, which was the strongest year ever before 2020, FMCSA authorized fewer than 3,700 new carriers per month on average.
Stronger new entry and fewer carrier exits resulted in a net increase in the for-hire carrier population of 219 carriers. While that is a small number, it is only the third m/m increase in the carrier population since September 2022 and is the largest of the three.
Even before August, the number of carriers exiting the market on a net basis had been tapering off. The big question, though, is what this trend means. Is stabilization a sign that freight market dynamics are improving for carriers? Or are external factors propping up capacity, thereby prolonging a freight rate recovery for trucking companies?
Spot metrics
Total broker-posted spot rates in the Truckstop system fell to their lowest level since July 2020 during the week ended August 23 (week 34) due mostly to the recent decline in flatbed rates. In the previous week, total rates still had been slightly higher than they were during most of last year’s fourth quarter.
Refrigerated spot rates ticked up a small fraction of a cent, but dry van spot rates were the lowest since mid-May. Flatbed rates, which have declined for 10 straight weeks, were the lowest since July 2020 except for the final week of 2023.
The current week (week 35) represents a critical benchmark for assessing the market as spot rates for van equipment almost always see healthy gains during the week before Labor Day.
Total load activity eased less than 1% to its lowest level of the year except for the week that included Independence Day. Load postings were 14% below the same 2023 week – the largest negative y/y comparison since the first week of the year – and close to 39% below the five-year average for the week.
For more on week 34 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
Total North American rail traffic grew 1.3% y/y for the week ending August 24 with intermodal traffic rising 7.1% and carloads falling 4.5%, according to data from the Association of American Railroads.
This drop in carload traffic is largely attributable to the disruptions caused by the Canadian rail work stoppage. The lockout lasted only 17 hours but still required time for the rail network to get back up and running in addition to the ramp-down time that occurred ahead of the stoppage.
The disruption resulted in a 22% y/y plunge in the carload traffic for Canadian carriers, including not only their Canadian traffic but also their U.S. and Mexican operations. Of the 10 AAR commodity groups, only the “other” category saw y/y growth for the Canadian carriers with all others showing significant y/y contractions.
Canadian carriers’ intermodal also saw significant y/y declines, falling 28% this week. However, this decline was offset by gains of 17.1% in the U.S. and 5.7% in Mexico. Part of this growth, particularly in the U.S., comes from the receiving of diverted ships that otherwise would have berthed in Canada. The U.S. growth also comes at a time of an approaching labor strike at U.S. East and Gulf Coasts, causing some shippers to reroute ships and pull forward inventory early ahead of the holiday shipping season.
YTD, total North American rail traffic is up 2.3%. With intermodal up 8.1%, and carloads down 3.2%. Within carloads, four of the 10 AAR commodity groups show positive YTD y/y growth, unchanged from recent weeks. These commodities include petroleum products, up 8.3%, chemicals, up 4.1%, grain, up 4.2% and farm products excluding grain, up 1.1%.
