The Freight Economist
April 2024
Executive summary
Monthly economic and market update
The US manufacturing
economy expanded in March
after contracting for 16
consecutive months, according
to the Institute for Supply Management (ISM).
US economy
Imports
Income and spending
Labor market
Freight demand
Merchant
wholesalers
Truck
tonnage
Manufacturing
Consumer spending
Merchant wholesalers’ real sales rose 1.1% in February after dropping 2.1% in January. While still down from Q4, sales were 1.8% higher year-over-year, led by motor vehicles and parts (+5%), farm products (+22%), and petroleum products (+11%). However, these three sectors do not contribute substantially to truckload demand, because they move on bulk or specialized trailers. Excluding motor vehicles and bulk (lumber, construction materials, minerals, metals, petroleum, and farm products), real wholesalers’ sales were still 1.7% below their year-earlier level.
Merchant wholesalers
What does it mean for truck tonnage?
Consumer spending on goods
Key data points and commentary
Trucking
volume
Rail volume
and rates
Geographic
trends
Routing guide trends
Routing guide trends
Geographic trends
Average m/m and y/y van spot rate index by origin regions – March
Trucking volume
The Cass Freight Shipments Index fell 2.3% in March, but was only 3.4% lower than its year-earlier level. This was the highest y/y comp since April 2023. Meanwhile, the ATA Truck Tonnage Index rose 4.3% in February after decreasing 3.2% in January (which was due to weather). Although February’s level was the highest in a year, the index was still 1.4% lower y/y.
Rail volume and rates
Intermodal prices fell 0.3% in March after plunging by 5% in February, according to the Producer Price Index. The intermodal PPI was 7.3% lower y/y. Meanwhile, rail prices rose 0.1% in March and were 2.9% higher than their year-earlier level according to the same source.
Mazen’s work focuses on analyzing the freight transportation landscape, and producing short- and long-term forecasts based on supply and demand dynamics. He is also a research affiliate with the Intelligent Transportation Systems (ITS) Lab at MIT, where he completed his PhD in 2019. His work falls at the intersection of ITS, economic modeling, and analytics.
mdanaf@uberfreight.com
By Mazen Danaf, Senior Economist and Applied Scientist, Uber Freight
Featuring insights and contributions from Uber Freight leadership,
technologists and market specialists.
Van, reefer, and intermodal spot rates all fell sharply in March as the market softened. Flatbed spot rates rose in line with seasonality. Contract rates remained almost flat across all modes. The dry van first tender acceptance rate rose to 92.3%, its highest level since October 2023, but was still 1.4% lower than its year-earlier level.
Containerized imports at US ports rose 0.4% in March according to Descartes, and were 15.7% higher than their year-earlier level. However, they were still 16.1% below the March 2022 level. Imports were dragged down by the Chinese New Year, which resulted in a one-week holiday starting February 11. The US ports felt the impacts of this holiday a few weeks later in March.
According to the US Census Bureau, imports in the last 12 months were led by motor vehicles and parts (+16.2% y/y) followed by food and beverages (+7.6%) and capital goods (+5.9%). However, because of the ongoing manufacturing recession, imports of industrial supplies fell by 8.2% y/y in February.
Executive
summary
US
economy
Freight
demand
Freight
supply
Imports
Average m/m and y/y van spot rate index by destination regions – March
Dry van spot rates fell across all regions (both inbound and outbound) in March, except for outbound freight originating from the Southwest, where they rose 3.1%. The largest decreases were observed for outbound freight from the Northeast (-8.6%) and Midwest (-8.4%). Compared to March 2023, spot rates were lower across all regions (by single digit percentages), except for outbound rates from the West, which were 4.8% high year-over-year.
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Key data
points
Shipper and carrier insights
Real consumer spending on goods rose only 0.1% in February after falling 1.3% in January. Although still positive y/y, spending on goods was only 1.1% higher than its year-earlier level, the lowest comp since April 2023.
Weakness was largely caused by spending on nondurable goods, which fell 0.6% and was only 0.8% higher y/y. This was mostly driven by gasoline, where spending fell by 2.9%. Excluding this sector, spending on nondurables was down only 0.3% month-over-month (m/m). Notably, spending on clothing and footwear also fell by 1.5%, while other sectors saw modest changes m/m.
Meanwhile, spending on durables rose 1.2% in February, but that followed a sharp decrease of 2.7% in January. The increase was driven by motor vehicles and parts, where spending rose 3.8% m/m. Other sectors that saw increases in spending were house and garden supplies, household appliances, and jewelry and watches.
Are you paying more for freight brokers? You’re not alone
Inflation
Retail and food services sales rose 0.7% in March to a new all-time high, after a 0.9% increase in February. Sales were 4% higher than their year-earlier level, which is higher than the current rate of inflation in goods. This indicates that the actual quantity of goods sold has increased over the last year.
Excluding motor vehicles and gasoline stations, which do not contribute significantly to truckload demand, retail sales were up 1.0% in March and 4.9% year-over-year. However, March’s increase was driven mostly by nonstore retailers. Excluding e-commerce and gas stations, sales only rose 0.1% in March, and were 3% higher year-over-year.
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Truckload demand rose in February, driven by recovery across manufacturing and wholesale. Truck tonnage produced by these two sectors rose 0.7% and 1.4% m/m respectively. However, it was about 2% below its year-earlier level. Meanwhile, consumer spending on goods contributed negatively to truckload demand, as tonnage fell 0.3% in February.
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However, the freight market unexpectedly added more capacity in March. For-hire trucking carriers added 5.1K jobs, the highest increase since June 2022, except for September 2023, when carriers rushed to hire YRC’s laid off workers. In addition, the number of new trucking carriers authorized by FMCSA exceeded authority revocations for the first time since March of last year, and the second month only since October 2022.
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Both inflation and the labor market seem to be more resilient to the tightest monetary policy seen in decades. Consumer prices in the US have surprised to the upside for three months in a row. The unemployment rate fell to 3.8% in March as the economy added 300K payroll jobs, the highest increase since January 2023 (tied with May 2023).
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Data from the US Bureau of Labor Statistics also points to an ongoing capacity correction in the brokerage industry. After rising by 14.2% between March 2020 and March 2023, freight arrangement employment has fallen by 2.9% from its record high level seen last year.
Despite the recent reduction in employment, this sector, like the broader freight industry, remains oversupplied. The weekly work hours of employees in this sector fell to their lowest level since 2012, except for April 2020 when the COVID pandemic interrupted all freight flows across the country.
Rising container imports at US ports continued to boost intermodal demand. Although the average weekly intermodal loadings during March fell 0.7% from April’s level, they were still 10.7% higher than the March 2023 average. Meanwhile, average weekly carloads fell 1.4% in March, and were 1.8% lower year-over-year.
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Shipper and carrier insights
Both inflation and the labor market seemed to be more resilient to the tightest monetary policy seen in decades. In March, the US economy added 303K new payroll jobs, the highest since January 2023 (tied with May 2023). The unemployment rate also fell from 3.9% to 3.8%, still near historically low levels. In addition, February saw a 2.1% increase in the hiring rate, and while job openings remained flat according to the Job Openings and Labor Turnover Survey (JOLTS) survey.
As in the previous months, job growth was driven by service-providing sectors, which added 261K jobs in the last month and 2.623 million jobs in the last year, led by private education and health services, leisure and hospitality, and government jobs. Meanwhile, goods producing sectors only added 41K jobs in March, and 304K jobs in the last year.
On a positive note, wage inflation continued to subside. Wages rose only 0.3% in March, and were 4.1% higher y/y. This was the lowest rate of wage inflation since June 2021, but it still exceeded all of the pre-pandemic rates.
Labor market
Consumer prices in the US have surprised to the upside for three months in a row. Prices rose 0.3% in January, 0.4% in February, and 0.4% in March. The annualized rate of inflation implied by these three months is 4.6%, significantly higher than the Fed’s stated target of 2%.
To make matters worse, this does not seem to be a temporary phenomenon. Excluding the volatile food and energy sectors, prices also rose 0.4% in each of the last three months. The annualized rate of inflation implied by these three months is also 4.5%.
Shelter inflation, which was the largest contributor to the CPI growth in the last few months, continued to come down on a year-over-year basis to 5.6%. Meanwhile, prices increased significantly across other services, and were 4.8% higher than their year-earlier levels. And while prices of nondurable goods rose at an annualized rate of 1.7%, durables continued to see disinflation as prices were 2.1% lower y/y.
Inflation
Disposable personal income rose 0.2% in March, and was 4.1% higher than its year-earlier level. However, this was mostly driven by price inflation rather than an increase in real spending power. In February, prices rose by 0.3% according to the Personal Consumption Expenditures (PCE) Price Index, indicating that prices were 2.5% higher y/y. Therefore, real disposable income fell 0.1% and was only 1.7% higher y/y.
Despite the drop in income, real personal spending rose 0.4% in March. This was mostly driven by services, where spending rose 0.6% led by financial services and insurance. Following the recent surge, spending on services surpassed its long-term pre-pandemic trend for the first time since March 2020. Meanwhile, real income remained a staggering 5.3% below its long-term trend.
The increase in spending, despite lower real incomes, indicated that less cash went into consumers’ savings. In March, consumers only saved 3.6% of their income, the lowest rate since December 2022.
Income and spending
The US manufacturing economy expanded in March after contracting for 16 consecutive months, according to the Institute for Supply Management (ISM). The ISM Purchasing Managers’ Index (PMI) rose to 50.3, which was just above the expansion threshold of 50.0.
The Production index surged to 54.6 in March, and the New Orders index returned to growth after rising to 51.4. The employment index remained below 50.0 for the sixth consecutive month, indicating that factories continued to reduce their headcount, with sizable layoff activity reported.
Four of the six largest manufacturing industries surveyed by ISM reported growth in March: 1) Food, Beverage & Tobacco Products, 2) Fabricated Metal Products, 3) Chemical Products, and 4) Transportation Equipment. These four sectors account for 54% of the manufacturing GDP.
Meanwhile, several sectors contracted, including Furniture & Related Products, Plastics & Rubber Products, Electrical Equipment, Appliances & Components, Machinery, Computer & Electronic Products, and Miscellaneous Manufacturing.
Raw materials prices rose at a faster pace in March, as the Prices index rose to 55.8, the highest level since August 2022.
Manufacturing
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Both manufacturers’ new orders and shipments rose 1.4% in February. Increases were observed across both durable and nondurable goods. Among durable goods, the increase was led by transportation equipment, where orders for nondefense aircraft and parts rose 24.6% m/m. Excluding transportation, orders for durable goods were up only 0.3% m/m, while shipments moved slightly lower in February (-0.1%).
Orders for nondefense capital goods excluding aircraft, an early indicator of manufacturing activity, rose 0.7% in February, but shipments fell 0.6%. New orders and shipments were up 0.6% and 1.0% y/y respectively. However, since these figures are measured in dollars, the increase is mostly due to price inflation, and not an increase in the actual quantities ordered.
In nondurable goods, both orders and shipments rose 1.6% in February, but remained 0.5% below their year-earlier levels.
Manufacturing
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Freight supply
Spot rates
Carrier
population
Truckload
supply & demand indices
Driver
employment
The Federal Motor Carrier Safety Administration (FMCSA) authorized 5,187 new for-hire trucking carriers in March, the highest number since August 2023 and the third increase in a row. Meanwhile, net revocations of for-hire trucking authorities totaled 5,034, the lowest level since April 2022.
The number of new entrants exceeded revocations for the first time since March of last year, and the second month only since October 2022. Since then, the carrier population has decreased by almost 30K. Despite this historical drop, the number of active carriers remains substantially higher than the pre-pandemic level, because more than 125K carriers have been added to the market between May 2020 and October 2022.
Carrier population
The latest data show that truckload demand resumed its slow recovery, while excess capacity continued to last longer in the market. Truckload demand rose 0.2% in Q1 despite adverse weather conditions impacting activity in manufacturing, wholesale, and retail. Truckload demand was 0.1% higher y/y, but 4.5% below the March ’22 peak. Meanwhile, supply rose only 0.1% in Q1 due to slow employment in the long-distance truckload sector.
Truckload supply and demand indices
For-hire trucking carriers added 5.1K jobs in March. This was the highest increase since June 2022, except for September 2023, when carriers rushed to hire YRC’s laid off workers. Despite this increase, trucking employment was 1.2% lower than March 2023. In the long-distance truckload sector, carriers added 700 jobs in February. Employment in this sector, which is a strong predictor of truckload spot rates, was almost flat y/y, indicating that excess capacity remained in the market longer than many have expected.
Driver employment
Dry van spot rates fell 5 cents per mile in March from February’s average to $1.65. March’s rates were generally similar to those observed in Q3 and Q4 of 2024, before the market tightened due to the holidays and January’s winter storm. On average, spot rates were 5.8% lower than their year-earlier level.
March’s rates are typically expected to be slightly higher than February, which was not the case this year. Spot rates were high in the beginning of February due to January’s freezing weather, but collapsed afterwards. If typical seasonality holds this year, April’s spot rates are expected to be lower than March. Rates usually start rising in the second half of May as International Roadcheck and produce season begin.
Spot rates
The recent rise in inflation and employment indicate that the Fed is likely to keep the Federal Funds Rate higher for longer. Despite that, freight demand is back to growth mode. Retail sales rebounded in March and manufacturing output expanded for the first time in 16 months.
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Is inflation making a comeback?
Is the great carrier exodus coming to an end?
In the last 6 months, broker fees in the US have been going up. The producer price index of transportation arrangement services, which include freight brokers, has increased by 14% since August 2023.
FTR provides several possible explanations for this increase, including:
- The Yellow bankruptcy which happened around the same time that the brokerage PPI has been rising
- The ongoing capacity shortfall that disrupts route guides, and increases shipper’s demand for brokers’ services
- A correction in broker margins which had fallen to unsustainable levels last year, necessitating higher prices at the expense of
lower volumes
- The tightening market showing up first in higher invoice amounts for brokers before it flows to carriers’ spot rates
- The declining population of authorized brokers, which has been falling sharply for about a year, the largest of which came from
Convoy’s shutdown. The shutdown occurred during the same period that the brokerage PPI has been rising. This is the most
plausible explanation, because brokers who are exiting the market are more likely to be those which underpriced their services,
and their failures will automatically result in an increase in the average broker prices.
Impacts and recommendations from the Baltimore’s Key Bridge crash
- The Port of Baltimore handled more than $80 billion in international cargo in 2023. It’s the top port for the nation's farm and
construction equipment, and the closest East Coast port to the Midwest.
- Prior to the accident, nearly 4,900 trucks passed over the Francis Scott Key bridge per day.
- Overall, there will be minimal impacts to container traffic. The majority of volume is being diverted to the port of New York/New
Jersey or the port of Virginia. So far, this has generally not caused any major congestion or increase in pricing other than
diversion fees charged by carriers for specific Baltimore-designated origins or destinations. Salvage crews have started
unloading containers from the Dali, and Unified Command announced they will re-open the main channel by the end of May.
- Uber Freight will continue to provide additional visibility in the region, and until the confirmation of the channel opening will
continue to reroute shipments to alternate, nearby ports.
Market conditions
Market
conditions