Market Update December 2024

The Freight Economist

December 2024

Executive summary

Monthly economic and market update: Year in review

Holiday spending is projected to grow 8.4% year-over-year.

U.S. economy

Consumer spending

Black Friday sales

Housing market

Freight demand

Imports

Truck tonnage

Manufacturing

Wholesale inventories

U.S. container imports declined in line with seasonality. U.S. container imports fell 5% in November, which is consistent with seasonal declines seen in previous years, though smaller than the 9% decrease over the same period in 2023. Year-over-year imports were 12.8% higher, and up 24.6% from pre-pandemic November 2019, according to Descartes. Imports from China also fell, though volumes were 13.3% higher year-over-year. This year saw a 14% increase in container imports compared to 2023, bringing the total to levels comparable to the exceptionally strong import years of 2021 and 2022.

Imports

What does it mean for truck tonnage?

Wholesale inventories

Key data points and commentary

Trucking volume

Rail volume and rates

Geographic trends

Routing guide trends

Geographic trends

Average m/m and y/y van spot rate index by origin regions – November Source: DAT

Trucking volume

Freight shipment volumes increased in November, according to the Cass Freight Shipments Index, which rose 2.8% on a seasonally adjusted basis. The index was only 0.7% below its year-ago level, the best year-over-year comparison since February 2023. The American Trucking Associations (ATA) Truck Tonnage Index also indicated increased freight demand, rising to 114.6 in October from 113.3 in September. Since reaching a low point in January of this year, tonnage has increased by 3%, according to the ATA.

Rail volume and rates

Intermodal costs increased by 0.6% in November but remained 5% below year-ago levels. Despite rising intermodal demand, this year-over-year drop is expected due to the typical quarterly delay in intermodal rate adjustments compared to truckload contract rates, which have only recently turned positive year-over-year. In contrast, carload rates decreased by 0.2% in November but remained 2.6% higher year-over-year.

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.

Routing guide performance deteriorated slightly in November. The first tender acceptance rate fell slightly from 92% to 91% in Nov, and routing guide compliance fell from 95% to 94%. First tender acceptance rates fell across all trailer types and intermodal shipments. While inflation over the primary carrier remains low, it rose from 1.6% to 1.9%, also indicating rising shipper costs and a tighter market. Averaged over the year, these three indicators showed little change from 2023.

Consumer spending held steady in 2024. Despite widespread negative sentiment, consumer spending remained robust in 2024. Durable goods spending is projected to increase by 2.7% compared to 2023, while nondurable goods spending is expected to rise by 1.9%. This healthy level of durable goods spending is atypical during recessionary periods, suggesting that concerns about an imminent recession are minimal. Although nondurable goods spending remains positive year-over-year, it has grown at a slower pace than historical norms.

Executive summary

U.S. economy

Freight demand

Freight supply

Consumer spending

Average m/m and y/y van spot rate index by destination regions – August Source: DAT

Dry van spot rates experienced mixed results in November. Outbound rates in the West surged by 7.8%, aligning with seasonal expectations and fueled by the preceding import rush and demand for Christmas trees. Conversely, the Northeast region saw a counterseasonal decline of 2.9%. Compared to the same period last year, spot rates were higher across all regions. The Southeast region experienced the smallest year-over-year increase at 1.4%, while the West region saw the most significant growth at 16.7%."

Key data points

Shipper and carrier insights: 2024 lookback

The wholesale sector continued its significant destocking efforts in 2024. The destocking trend that began in 2023 continued across various industries in 2024. With the exception of machinery, wholesalers' inventory-to-sales ratios either decreased or remained stable compared to the previous year in October. The most substantial declines were seen in apparel, household appliances, electronics, and hardware. While demand from manufacturing and wholesale sectors remains weak, the reduction of excess inventory has alleviated a significant headwind for freight demand.

Inflation

Retail and food service sales climbed 1% in July, primarily boosted by a 3.6% surge in motor vehicle and parts dealers. Excluding this sector, sales edged up 0.4% from the previous month and were 3.1% higher compared to the same time last year. Importantly, this sales growth outpaced the rate of inflation for goods, which actually decreased over the past 12 months.

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As of October 2024, manufacturing-driven freight demand continues to decline and has yet to reach its bottom. It has decreased by 1.2% year-over-year and is 5.4% below its pandemic-era peak. While the wholesale sector has shown signs of stabilizing in recent months, wholesale-driven demand also remains 4.1% below its pandemic peak. Without a recovery in the stagnant manufacturing sector, significant growth in freight demand is unlikely.

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As we conclude 2024, we reflect on the year's performance for the U.S. economy and freight market. The Federal Reserve appears to have successfully navigated the economy toward a soft landing. Inflation continued its downward trend, reaching 2.7% in November, marginally above the Fed's 2% target. While the labor market softened, unemployment rates remained relatively stable.

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Intermodal volume remained strong in November, despite a 2.2% decline from the previous month. This decrease can be entirely attributed to seasonal factors, as volumes typically dip between October and November. Compared to November 2023, volumes were up 7.8%. This year has been characterized by robust intermodal demand, with volumes on track to exceed 2023 levels by 6.9%. Meanwhile, average weekly carload shipments decreased by 2.3% in November and were 2% below their year-ago level.

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Shipper and carrier insights

The housing market weighed heavily on freight demand in 2024. As of October, both housing starts and new home sales hovered near their lowest points. Annually, housing starts declined by 4.7% from 2023 and were 15.6% below the average monthly level of 2021, the peak year since the Great Financial Crisis. While new home sales edged up 2.4% in 2024, they still lagged 18% behind the 2020 level. Elevated mortgage rates remained the primary driver of the housing market's sluggishness. The 30-year fixed rate persisted at 6.7% in the first week of December, nearly mirroring its 2023 closing level.

Housing market

Inflation has nearly returned to pre-pandemic levels in 2024. The Consumer Price Index (CPI) increased by 2.7% year-over-year in November. Excluding volatile food and energy prices, core inflation rose 3.3% annually. While still slightly elevated, inflation has significantly decreased from the peaks of 2021 and 2022, suggesting that the U.S. Federal Reserve has successfully guided the economy toward a soft landing.

Inflation

Another record Black Friday. Shoppers set a new record, spending $10.8 billion online on Black Friday. This represents a 10% increase compared to the previous year, according to Adobe Analytics, which tracks retail transactions. This figure is more than double the amount spent in 2017. In contrast, in-store shopper traffic on Black Friday declined by 8.2% compared to 2023, as reported by Sensormatic Solutions, which tracks retail store foot traffic. U.S. consumers continued their online spending spree on Cyber Monday, allocating $13.3 billion, a 7.3% year-over-year increase. Adobe projects record-breaking holiday season spending, exceeding $240 billion and reflecting an 8.4% growth from the previous year's peak season.

Black Friday sales

The U.S. manufacturing sector has remained largely stagnant over the past two years. Data from the U.S. Federal Reserve indicates a slight decline in manufacturing output during 2023 and 2024. With a few exceptions, most manufacturing sectors contracted in 2024, particularly those related to aerospace and transportation equipment, apparel, plastics, furniture, and minerals. While some sectors, such as motor vehicles and parts, electronics and appliances, petroleum and coal products, and chemicals, experienced growth, this did not significantly impact truckload demand, as many of these products are transported on specialized trailers. Although manufacturers' new orders remained relatively flat year-over-year, the increase can be primarily attributed to inflation, as these orders are measured in nominal dollars. In real terms, adjusted for inflation, orders likely decreased in 2024. Similarly, orders for core capital goods (nondefense capital goods excluding aircraft), a leading indicator of future manufacturing activity, were weak throughout the year.

Manufacturing

The ISM report also highlighted widespread concerns among manufacturers about declining demand and order levels. Respondents across various sectors expressed pessimism about the near-term outlook.

Manufacturing

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Freight supply

Spot rates

Carrier population

Supply and demand indices

Driver employment

Truckload demand and supply remained relatively stable in October, showing little change from the previous year. While demand increased by 1.7% from its lowest point, it still lags 3.5% behind the peak observed in Q1 2022. Our indices indicate that truckload supply has outpaced demand for the past two years. In 2024, both demand and supply indices remained largely unchanged from their 2023 averages. Averaged over the year, demand increased marginally by 0.3%, while supply rose by 0.2% due to higher truck sales.

Truckload supply and demand indices

The Current Employment Statistics (CES) survey data, used to estimate employment, is likely to be revised downward in February. This revision will be based on benchmarking against the more reliable Quarterly Census of Employment and Wages (QCEW) survey. The QCEW data indicates a more significant decline in truckload employment, showing a 3.6% drop compared to the 1.4% decrease reported by the CES data.

Driver employment

Dry van spot rates increased in late November and early December, aligning with seasonal trends. These rates are projected to conclude the year at a similar average level as 2023. The year commenced with year-over-year rate declines, reaching parity around May. Subsequently, rates consistently surpassed their year-ago counterparts. By November, spot rates were 5.4% higher year-over-year. Similarly, reefer and flatbed rates surpassed their 2023 levels in July and August, respectively. As of November, both modes were approximately 4-5% higher year-over-year. Meanwhile, dry van contract rates, which typically lag spot rates by approximately six months, recently turned positive year-over-year in October. Van contract rates are projected to average just over $2.0/mi in 2024, approximately 6% below the 2023 average.

Spot rates

Market conditions

Averaged over the entire year, trucking spot rates remained nearly flat but turned positive in the second half. Contract rates, which typically lag spot rates by six months, were 6% lower than 2023 levels but approached year-over-year parity in the fourth quarter.

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The rate of revocations has slowed, but the carrier population is still shrinking. In November, the Federal Motor Carrier Safety Administration (FMCSA) authorized 4,297 new trucking firms while revoking 4,528 authorities, resulting in a net decrease of 231 carriers. Over the past four months, the average monthly decline in for-hire carriers has slowed to 327, significantly lower than the 1,755 monthly decline observed in 2023. Both the number of new authorizations and revocations in 2024 was lower than in 2023. Consequently, the net carrier population decreased by 9,941 carriers year-to-date through November, compared to a 21,063 carrier decline in 2023. As of November 2024, the number of freight authorities still exceeded February 2020 levels by 36%.

Carrier population

The past year witnessed several supply and demand shocks impacting various U.S. regions. However, none of these disturbances were sufficient to significantly disrupt the freight market or leave a lasting impact. Instead, the market adhered to seasonal trends, with a modest upward trajectory in spot rates during the second half of the year.

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Unlike the previous three years, 2024 was characterized by relative stability across the U.S. economy and freight market. Consumer spending sustained moderate growth, and the manufacturing and housing sectors remained in contraction. The import sector, however, experienced significant growth, reaching levels comparable to 2020 and 2021. Yet, this surge was insufficient to bolster overall freight demand.

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The housing market weighed heavily on freight demand in 2024.

Industrial production of machinery, primary metals, and fabricated metals has remained relatively flat or slightly declined over the past year. A recovery in these sectors seems unlikely in the near future, as orders and shipments of core capital goods—a key indicator of manufacturing activity—have also stagnated. Orders for core capital goods, which are nondefense capital goods excluding aircraft, are considered an early indicator of manufacturing activity. Weak orders and shipments in this sector suggest that a broader economic recovery may be delayed.

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Industrial equipment and supplies

Automotive

Auto manufacturing has been one of the bright spots in the economy over the past year, driven by pent-up demand and a shortage of vehicles at dealerships. While production rose to meet demand, the market is starting to show signs of saturation, with inventories gradually normalizing and potential glut looming on the wholesale side.

Paper and plastics

Paper and plastics are highly used in the packaging industry, which has been affected by the recent slowdown in food spending after the economy re-opened. In addition, the demand for paper products was already on a downward trajectory due to factors such as digitalization, adoption of alternatives (plastics), and growth of e-commerce. The pandemic further accelerated this decline. Moreover, a surge in downstream inventories led to a slowdown in manufacturers’ demand.

Nondurable consumer goods

Demand for food consumed at home fell from its pandemic highs as the economy re-opened, normalizing back to its pre-pandemic levels. Demand for other consumer goods (such as apparel) continues to be pressured by external competition, slowing consumer demand, and high downstream inventories.

Durable consumer goods

Durable consumer goods such as appliances, furniture, and wood products are affected by the ongoing housing recession. New home sales remain below the 2019 levels, and about 30% below the pandemic peak. Similarly, housing starts are at their lowest level since the beginning of the housing recession, 32% below the 2022 peak.

Inflation has nearly returned to pre-pandemic levels in 2024.

Consumer spending held steady in 2024.

January’s winter freeze

A severe winter storm struck much of the United States in January 2024, particularly impacting southern regions. Record-breaking low temperatures, heavy snowfall, and icy conditions led to widespread disruptions, power outages, and numerous fatalities. States like Texas, Tennessee, and Mississippi were among the hardest-hit areas. This was likely the most significant shock to U.S. freight supply and demand. As a result, spot rates and tender rejection rates surged counter-seasonally in the first quarter. However, as weather conditions improved, spot rates and tender rejections returned to pre-peak season levels

Driver employment

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Long-distance truckload employment continued to fall. Long-distance truckload employment declined by 1.8 thousand to its lowest level since October 2022, indicating a 2.1% drop in capacity from the peak. Wages in the long-distance truckload sector also remain 1.7% below their peak despite wage inflation in other sectors of the economy, suggesting that carriers continue to prioritize cost-cutting measures. While capacity in OTR trucking continues to dwindle, the stability observed in overall trucking employment figures last month can be attributed to an increase in specialized trucking employment, particularly a surge in the "Used Household and Office Goods Moving" segment, which is not relevant to OTR freight rates.

Driver employment

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Driver employment

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Average m/m and y/y van spot rate index by origin regions – January 2024 (Source: DAT)

The Port of Baltimore closure

The collapse of the Francis Scott Key Bridge on March 26, 2024, severely disrupted shipping operations at the Port of Baltimore for several weeks. However, after extensive repairs, the port reopened. While the incident caused delays and diversions of cargo, it did not significantly impact national or local spot rates, likely due to strategic diversions. Uber Freight worked closely with shippers to navigate the disruptions and divert their cargo strategically.

Hurricanes Helen and Milton

2024 marked an active hurricane season, with storms like Hurricane Milton and Hurricane Helene causing significant damage and disruption in the southeastern United States. While hurricanes typically contribute to inflationary periods in the freight market, this year's events had a more localized impact. Regions directly affected by these storms experienced increased inbound freight costs. However, the broader freight market saw little to no impact on spot rates.

The ILA strike

The International Longshoremen's Association (ILA) engaged in a three-day strike in October 2024, causing significant disruptions to East and Gulf Coast ports. The strike was resolved with a tentative agreement on wage increases and an extension of the contract until January 2025. However, ongoing negotiations over automation have led to the threat of another strike if a deal isn't reached by the deadline.

Canadian rail strike

A major rail strike in Canada disrupted freight and passenger rail operations in 2024. The strike, involving thousands of workers, began in August and caused widespread delays and increased costs. Government intervention through binding arbitration ultimately resolved the dispute.

Aside from these shocks, what will be the primary driver of rate inflation in the near future?

While recent supply and demand shocks have had limited impact on the broader freight market, a sustained shift toward equilibrium requires more significant and widespread changes. The market has been gradually adjusting through slow demand recovery, primarily driven by consumer goods and imports, coupled with a gradual reduction in excess capacity. Looking ahead to 2025, lower interest rates are expected to stimulate the manufacturing and housing sectors, boosting demand. Additionally, tariffs could stimulate the manufacturing economy, resulting in higher freight demand. While favoring domestic production, tariffs could also lead to higher prices for goods.

Seasonal trends are the primary driver of market movements

December usually sees a surge in freight demand due to holiday shopping coupled with a decrease in available drivers as many take time off. This shortage, combined with potential weather disruptions, leads to higher costs, especially in the spot market. February typically marks a decline in spot market demand as the holiday rush subsides and drivers return to work. This usually results in spot rates falling below annual averages, with the exception of a few Midwest regions.