Market Update November 2024

The Freight Economist

November 2024

Executive summary

Monthly economic and market update

Dry van spot rates rose 5.8% year-over-year in October, the highest since February 2022.

U.S. economy

U.S. GDP

Income and spending

Labor market

Freight demand

Imports

Truck tonnage

Manufacturing

Retail sales

Containerized imports declined slightly in October but remained strong, up 8.1% year-over-year, and exceeded 2.4 million TEUs for the fourth straight month, according to Descartes. West Coast ports maintained their upward trend in container import volumes, outperforming their East and Gulf Coast counterparts. The West Coast's share of container imports increased marginally from 45.7% in September to 45.8% in October. Despite a modest 1% decline in October imports, the seasonally adjusted figure reveals a 2.3% drop, suggesting that the peak import period may have shifted earlier this year. U.S. importers continue to face significant hurdles, including ongoing labor disputes, increasing port congestion, geopolitical risks in the Middle East, and the potential imposition of new tariffs by the incoming administration.

Imports

What does it mean for truck tonnage?

Retail sales

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 – October Source: DAT

Trucking volume

Freight shipment volumes continued to decline in September. The Cass Freight Shipments Index decreased by 2.6% on a seasonally adjusted basis and was 5.2% lower year-over-year. Similarly, the American Trucking Associations' For-Hire Truck Tonnage Index fell by 2.1% in September, following a 1.7% increase in August. Compared to September 2023, the index was down 0.9%.

Rail volume and rates

Intermodal costs decreased by 2.2% in October, according to the PPI, and were 5.5% lower year-over-year. This decline may be attributed to market volatility, including the recent port labor negotiations and ongoing tariff discussions amid rising import demand. However, long-term intermodal rates are expected to follow truckload contract rates, which are nearing a bottom and could start increasing in the coming months. Meanwhile, carload rates increased 0.4% in October and were 3.4% 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 remained consistent in October. The first tender acceptance rate remained at 92% and route guide compliance at 95%. First tender acceptance rates fell slightly for van and flatbed but rose for refrigerated and intermodal shipments. Inflation over the primary carrier remains near zero, indicating that routing guide failure remains de-risked in this market.

Consumer spending on goods, including both durable and non-durable items, surged in the third quarter. This category contributed 1.25 percentage points to the overall 2.8% GDP growth. Spending on durables and non-durables increased by 8.1% and 4.9% annualized, respectively, outpacing the 2.6% growth in services spending. International also saw significant growth, with goods imports and exports rising by 11.6% and 12.2%, respectively, according to the GDP report. However, residential investment declined by 5.1%, subtracting 0.21 percentage points from GDP growth. Additionally, a slowdown in manufacturing output coupled with increased consumer spending led to a reduction in private inventories—temporarily dampening GDP growth. This inventory drawdown could signal a future uptick in manufacturing activity and, consequently, freight demand.

Executive summary

U.S. economy

Freight demand

Freight supply

U.S. GDP

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

Dry van spot rates increased by approximately 3% in October in the Northeast, Midwest, and West regions, following seasonal trends. In the Southwest and Southeast, rates declined slightly. As of October, spot rates exceeded year-ago levels in all five major U.S. regions. The West region experienced the highest year-over-year increase (+10.2%), while the Southeast saw the lowest (+3.2%).

Key data points

Shipper and carrier insights Current procurement headlines

Retail sales increased in October, up 0.4% month-over-month and 2.4% year-over-year. This growth was primarily driven by a rebound in motor vehicle and parts sales. Excluding these categories and gasoline stations, retail sales saw a more modest 0.1% monthly increase but a robust 3.8% year-over-year growth. Most retail sectors experienced healthy annual growth, with the exception of gasoline stations (impacted by lower gas prices) and furniture and appliances (affected by the housing market slowdown).

Anticipated tariffs

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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Truckload demand increased slightly in September, driven by a 0.6% rise in consumer-driven freight. Wholesale and manufacturing-driven demand remained relatively unchanged, down 1% and 1.3% year-over-year, respectively. This suggests that the recent surge in spot rates is not due to a demand recovery but rather seasonal factors and capacity reductions in previous months.

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The U.S. economy grew at a 2.8% annual rate in the third quarter, fueled by strong consumer spending on goods. However, residential investment and inventory declines weighed on growth. While the labor market is softening and inflation is moderating, the potential impact of upcoming tariffs on the freight market is uncertain. Tariffs could stimulate domestic manufacturing by reducing demand for imports.

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Intermodal volume continued to rise in October, boosted by surging imports and a broader gradual recovery in freight demand. The average weekly intermodal shipments increased 0.6% in October, up 3.9% year-over-year. Meanwhile, carload shipments rose 0.7% month-over-month but remained 1.7% below October 2023 levels.

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Shipper and carrier insights

Despite a stable unemployment rate of 4.1%, the labor market showed worrying signs in October. Total nonfarm employment increased by a meager 12,000, the lowest since December 2020, potentially impacted by recent hurricanes Helene and Milton, according to the Bureau of Labor Statistics. The JOLTS report also revealed concerns, with job openings falling 5.3% in September, dipping below the pre-pandemic 2018 peak for the first time. New hires were also down 5% year-over-year and 7% below pre-pandemic levels.

Labor market

The new administration's tariff policies could significantly impact supply chains in 2025. Tariffs can boost domestic manufacturing by making imported goods less competitive. Historically, higher tariffs on Chinese imports have been linked to increased U.S. manufacturing output as shown in the first chart below. Therefore, the anticipated tariffs could revitalize the stagnant manufacturing sector, boosting demand for freight services. However, tariffs could also lead to inflation in goods prices, as shown in the second chart.

Anticipated tariffs

Consumer spending on goods increased despite a slowdown in incomes Real disposable income rose 0.1% for the fourth consecutive month, up 3.1% year-over-year and 0.4% quarter-over-quarter. This growth, however, remains about 3% below pre-pandemic trends. Consumer spending increased 0.4% in September, with the savings rate falling to 4.6% from 4.8% in August. Real spending on goods rose 0.7%, up 2.8% year-over-year, while spending on services increased 0.2%, up 3.2% year-over-year.

Income and spending

Manufacturing output and new orders continued to decline in October The U.S. manufacturing sector experienced its 23rd consecutive month of contraction in October, as indicated by the ISM Manufacturing PMI of 46.5. Indicators for production, new orders, and backlogs continued to signal declining output and weakening demand. However, while the ISM PMI still points to contraction, it suggests a slower pace of decline in comparison to past recessions, where the index often fell into the 20s and 30s. This aligns with Federal Reserve data, which shows manufacturing output has been relatively flat since the end of 2022, with a modest 0.3% year-over-year increase in Q3 2023.

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

Class 8 tractor sales

Supply and demand indices

Driver employment

Both truckload demand and supply indices increased slightly in October, up 0.2% and 0.3%, respectively. Both indices were largely unchanged year-over-year, indicating an oversupplied market. While truckload demand rose 2.1% from its June 2023 low, it remains 3.5% below the Q1 2022 peak.

Truckload supply and demand indices

The trucking market is still oversupplied, but the rate of carriers leaving the industry has slowed. Trucking employment was relatively stable in October, and long-haul truckload employment even saw a slight increase of 1,600 jobs in September, the largest gain since May 2023. As we approach the end of the freight recession, this data contrasts with the sharp job cuts seen in 2020, suggesting a potentially less dramatic market recovery this time. The stabilization of trucking employment could also signal a potential shift in capacity. Shippers may be moving back from private fleets, which have become more costly, to the for-hire market. This trend is particularly noticeable as supply chain issues have significantly improved over the past two years.

Driver employment

Dry van spot rates led the way in October, rising 2.5%, while reefer and flatbed spot rates increased by 0.5%. Year-over-year, dry van spot rates were up 5.8%, the highest since February 2022. Dry van contract rates also saw a 1.0% increase in October, while reefer rates rose 0.4% and flatbed contract rates remained stable. Annually, van rates were relatively flat, reefer rates declined by 2.5%, and flatbed rates increased by 4.5%. Diesel prices increased marginally in October, rising by just 3 cents per gallon. As a result, the average fuel surcharge saw a minimal increase from 38 to 39 cents per mile.

Spot rates

Market conditions

Dry van spot rates increased 5.8% year-over-year in October, the highest level since February 2022. Although the trucking market remains oversupplied, the rate of carrier exits has slowed. Trucking employment was relatively stable in October, with long-haul truckload employment even rising slightly. This contrasts with the sharp job losses during the 2020 recession, suggesting a potentially less severe recovery this time.

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Class 8 tractor sales increased 14% in Q3 2024 compared to the previous quarter but remained 11% below the same period in 2023. Similarly, orders rose 11% sequentially but were 20% lower year-over-year. Due to weaker order trends, Class 8 tractor production declined 22% in Q3 2024, down 26% year-over-year. Year-to-date, Class 8 tractor sales were down 19%, while net orders were up 6% compared to the same period in 2023. This suggests a potential slowdown in the pace of capacity reduction as freight rates begin to recover.

Class 8 tractor sales and orders

Bid activity

- Annual full-network RFP events continue to be the trend with supplemental mini-RFPs utilized to support the route guide as needed between bid cycles. - After record activity in 2023, RFP events have been about flat through H1 2024, but picking up in Q3 and Q4 as some shippers are going to market early. Strategic trends - Shippers are beginning to insulate themselves ahead of a predicted upturn in the contract market. - Shippers are willing to bid entire network vs. only select lanes. - Most shippers are trying to keep their incumbents in place, if possible, through the RFP cycle. - Volume cutoffs remain a key strategic discussion while preparing to release an RFP event—low-volume strategy for coverage and backup carriers. Carrier behavior - TL carriers continue to cast a wide net in bids but are starting to narrow focus to preferred volume vs. any volume. - Brokers continue to be aggressive in an attempt to capture market share. - Incumbent carriers are trying to stay whole in RFPs. Some even push pricing increases with little success. Carrier pricing Q4 - TL savings range trending mid to low single digits as incumbents try to hold on price. Savings % declining.

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Freight demand remains mixed. Manufacturing output and new orders continued to decline in October. However, import volumes have remained strong, exceeding 2.4 million twenty-foot equivalent units (TEUs) per month for four consecutive months. Additionally, most retail sectors experienced healthy annual growth.

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Worrying signs in the labor market despite stable unemployment

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.

Seasonal trends are the primary driver of market movements

The Pacific Northwest market, along with the Midwest, Northeast, and West regions, is expected to experience further tightening in December. This is due to increased retail stocking for the holiday season and driver availability issues. By January, the Pacific Northwest, West, and Southeast markets are expected to soften. However, the Northeast and Midwest may experience some tightness due to potential freezing weather. In January 2024, severe and widespread freezing conditions led to significant increases in spot rates and tender rejections.

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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.

Tariffs may be one factor, among many, driving freight market recovery in 2025

U.S. GDP grew at an annual rate of 2.8% in the third quarter

Carrier Management

- Establish strategic relationships with key providers in your network. - Create symbiotic, long-term goals with key partners. - Partner with carriers on company initiatives around technology, best practices, and ease of doing business. - Develop formal processes to address service and performance improvement plans.

Navigating volatility

- Understand where your rates are to the market - Work with your carrier base to understand their network and cost pressures - Work with strategic carriers for cost and price transparency within your network and create an action plan for out-of-process lanes. - Stay close to your incumbents on critical lanes to understand price trends and capacity changes. - Understand your carrier base’s tracking and technology capabilities and set clear expectations - Routing Guide setup becomes more critical in a tightening market—backup carriers, low volume, etc.