The Freight Economist
October 2024
Executive summary
Monthly economic and market update
Container imports
surpassed 2.5 million TEUs
in September, exceeding the comparable levels seen
during the pandemic.
U.S. economy
Housing market
Income and spending
Labor market
Freight demand
Imports
Truck
tonnage
Manufacturing
Retail
sales
Container imports exceeded 2.5M TEUs in September.
Container imports increased 1.7% in September and were a remarkable 14.4% higher than the same month last year. For the first nine months of 2024, import volumes were 16.5% higher than the same period in 2019, according to Descartes. Imports from China continued to lead, reaching their three highest monthly volumes ever recorded.
September's increase is even more impressive considering seasonal expectations. Imports typically start to decrease in September and are expected to fall 2.9% from August's levels. Therefore, seasonally adjusted container imports likely increased by approximately 4.7% month-over-month.
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
Routing guide trends
Geographic trends
Average m/m and y/y van spot rate index by origin regions – September
Source: DAT
Trucking volume
The Cass Freight Shipments Index decreased 2.6% in September on a seasonally adjusted basis and was 5.2% lower than its year-earlier level. Conversely, the American Trucking Associations’ (ATA) Truck Tonnage Index increased by 1.8% in August and was 0.7% higher than its year-earlier level. While the former uses shipments corresponding to LTL, intermodal, and TL loads, the latter measures the volume of freight transported. Therefore, the discrepancy between the two indices is likely attributed to lower LTL volumes, as shippers are combining multiple LTL shipments into a single TL shipment. This trend is motivated by higher LTL rates and a stagnant TL market.
Rail volume and rates
Intermodal rates increased 0.2% in September after a 0.5% decline in August, as shown by the Producer Price Index (PPI). Despite the recent rise in volumes, rates were still 2.5% lower compared to last year. This is anticipated, as intermodal contract rates typically lag behind the broader truckload market by a quarter. Meanwhile, carload prices rose 0.3% in September and were 4.3% higher than a year ago.
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 September, with the first tender acceptance rate at 92% and route guide compliance at 95%. First tender acceptance rates remained unchanged for van and refrigerated loads but increased slightly for flatbed, from 93% to 94%. However, they decreased by 2 percentage points for intermodal shipments.
The housing market has a significant impact on freight, extending beyond the direct effects of construction activity. For instance, home sales are closely linked to demand for furniture, appliances, and home improvement supplies.
Although the Federal Funds Rate was recently lowered, mortgage rates have increased in the first two weeks of October. High mortgage rates continue to dampen demand for existing home sales, which have remained sluggish throughout the year. The supply of existing homes has decreased due to the "lock-in" effect, where many homeowners are currently holding onto their low mortgage rates from previous periods, making them reluctant to sell their homes and face higher current rates.
The lock-in effect does not impact new home sales, which have generally risen in recent months, particularly as the number of newly completed housing units reached its highest level since 2007. Compared to last year, new home sales were 9.8% higher, while existing home sales were 4.5% lower.
Executive
summary
U.S.
economy
Freight
demand
Freight
supply
The housing market
Average m/m and y/y van spot rate index by destination regions – August
Source: DAT
Dry van spot rates decreased for outbound loads originating in the Southeast and Southwest but increased slightly in the Northeast, consistent with seasonal trends. Compared to last year, rates were 10.7% higher in the West region and 5.7% higher in the Southwest. Outbound rates remained flat year-over-year in the Northeast and Southeast and were 2.9% lower in the Midwest.
Key data
points
Shipper and carrier insights
2025 outlook
Robust year-over-year growth, but mostly driven by e-commerce.
Retail and food service sales grew a healthy 0.4% in September but were only 1.7% higher compared to last year. This year-over-year slowdown is partly due to lower gasoline prices, as gasoline station sales decreased by 10.7% in the last 12 months. Excluding gasoline stations, retail sales increased 0.6% in September and were 2.8% higher than a year ago.
While sales in recent months were boosted by motor vehicles and parts dealers, this sector is experiencing a slowdown. In September, sales of motor vehicles and parts remained unchanged and were 0.3% lower than a year earlier. As of September, most of the year-over-year sales increases can be attributed to e-commerce (non-store retailers).
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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Consistent with strong retail sales, consumer-driven truckload demand increased slightly by 0.1% in August and was 2.3% higher compared to last year. On the other hand, wholesale demand decreased by 0.1% and manufacturing demand fell by 0.2%. Demand generated by these two sectors remains 0.8% and 1% lower year-over-year, respectively, and 4.2% and 5.2% lower than their respective peak levels during the pandemic-era tight market.
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The U.S. economy is showing signs of stabilization. Consumer prices rose by less than 0.2% for the fifth consecutive month, reaching a year-over-year increase of 2.4%, the lowest since February 2021. The unemployment rate has declined for two months straight, and the economy added 254,000 jobs in September, easing recession concerns.
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Weekly intermodal loads transported on Class 1 railroads increased by 1.8% in September, following a 5.4% surge in August. This rise was driven by increased imports and resulted in a staggering 9.1% increase compared to September 2023. Meanwhile, average weekly carloads rose 2% in September and 3.2% in August but remained 0.9% below their year-earlier levels.
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Shipper and carrier insights
The unemployment rate has decreased for two consecutive months, dropping to 4.1% after a recent surge. The US economy created 254,000 jobs in September, the highest number since May 2024, easing concerns about an impending recession. However, the possibility of a recession cannot be entirely dismissed.
The JOLTS survey presents a less positive view of the labor market. The hiring rate declined by 1.8% in August and was 9.7% lower than the previous year. Although job openings increased by 4.3% in August, they remained 14.1% lower year-over-year.
Labor market
The Consumer Price Index (CPI) increased by less than 0.2% for the fifth consecutive month, reaching a year-over-year growth of 2.4%, the lowest level since February 2021. Excluding food and energy, prices rose by 3.3% year-over-year, slightly exceeding the Fed's target of 2%.
The Producer Price Index (PPI) of Final Demand, a measure of wholesale prices and a leading indicator of the CPI, remained unchanged in September and was only 1.8% higher year-over-year. Excluding food, energy, and trade, the PPI also increased by 3.2% year-over-year.
Inflation
Data revisions show the consumer is stronger than previously thought.
The US Bureau of Economic Analysis has revised its data, indicating that the consumer's financial situation is stronger than initially believed. Real disposable income increased by 3.1% year-over-year in August and 3.2% in July (up from the previously estimated 1.1%). However, real income rose by less than 0.1% in June, July, and August, and even after the recent revision, it remains about 3% below its pre-pandemic growth trend.
The personal saving rate has also been revised upward from 2.9% in July to 4.9%, followed by a 4.8% rate in August. While this is still below the pre-pandemic average of 7% to 8%, it is considerably higher than the pre-revision estimates of 2% to 3%, which were reminiscent of the levels seen before the Great Financial Crisis.
Income and spending
Manufacturing remains in contraction.
The US manufacturing sector continued to shrink for the sixth month straight in September, as the ISM PMI held at 47.2. Backlogs and new orders remained below 50, signaling weaker demand. And while the employment index indicated headcount reductions for the fourth consecutive month, the prices index fell below 50.0 for the first time since December 2023, suggesting lower prices of commodities and raw materials.
The ISM survey's findings align with data from the US Federal Reserve on manufacturing output and the US Census on manufacturers' new orders, which show that the sector has not seen substantial growth since November 2022.
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
Truck and trailer sales
Supply and demand indices
Driver
employment
Truckload demand decreased 0.1% in August and was only 1% higher than its year-earlier level. September did not experience significant changes in any of the demand index components (manufacturing, wholesale, retail, imports, and exports). Meanwhile, supply remained unchanged in August and was 0.2% higher year-over-year. Based on our indices, truckload supply has outpaced demand for the past 23 months.
Truckload supply and demand indices
Driver employment continues to tick lower.
At first glance, the headline for-hire trucking employment figure appears to be returning to pre-pandemic levels. For-hire trucking employment fell 0.7K in September and was 0.5% lower than its year-earlier level. Compared to September 2019, employment was only 1.3% higher.
However, a closer examination of individual sectors reveals a different story. Most of the decline has been in the LTL sector, largely driven by Yellow's bankruptcy, resulting in a 21,000-job shortfall compared to 2019. Despite this, LTL pricing has remained relatively stable due to increased market discipline among LTL carriers, which exhibit more control over market prices compared to TL carriers.
In the more fragmented long-distance truckload sector, the market remains significantly oversupplied. Employment in this sector was approximately 22,000 jobs higher than pre-pandemic levels in August. Combined with weak demand, this oversupply explains the ongoing softness in the broader freight market.
Driver employment
Dry van spot rates decreased by 1 cent per mile in September after a 3-cent decline in August, as summer tightness continued to ease. Nevertheless, rates remained 2% higher compared to last year, marking the third consecutive month of year-over-year increases. Spot rates were slightly positive year-over-year across dry van, reefer, and flatbed loads. Dry van contract rates increased 4 cents per mile in September but remained flat year-over-year. Additionally, September witnessed notable increases in flatbed spot rates (1% month-over-month) and contract rates (2% month-over-month).
Diesel prices continued to fall in September, dropping 3.8% month-over-month and 22% year-over-year. However, it is likely that diesel prices have reached their lowest point and have started to rise in the first two weeks of October.
Spot rates
Market conditions
Market
conditions
This report analyzed various forecasts for dry van spot and contract rates. The forecasts suggest that spot rates are expected to increase between 7% and 19% in 2025 compared to 2024 averages, while contract rates are expected to rise between 0% and 8% year-over-year.
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Carriers are ordering and buying less equipment.
Year-to-date, dry van trailer orders have been 38% lower compared to last year and 41% below their 5-year average. Sales of van trailers have also declined 17% year-over-year over the first three quarters and were 4% below their 5-year average.
Similarly, Class 8 tractor sales declined 19% year-over-year in the first three quarters of 2024 and were 4% below their 5-year average. However, tractor orders appear to have reached their lowest point last year and have increased 6% year-over-year this year. Orders and sales of Class 8 tractors have recently surpassed their 5-year averages.
Truck and trailer sales
"All models are wrong, but some are useful." - George Box
It’s that time of the year again when shippers, carriers, and brokers start planning their budgets and strategies for the upcoming year. A valuable step in this process is to review different forecasts for spot and contract freight rates and prepare for a variety of potential scenarios.
Truckload spot rates
At Uber Freight, we analyzed various forecasts for dry van spot and contract rates from different sources and summarized the minimum, maximum, and average predictions. These forecasts indicate that spot rates are projected to increase between 7% and 19% in 2025 compared to their 2024 averages, with an average expected increase of 12% year-over-year.
Truckload contract rates
In contrast, contract rates are anticipated to grow at a slower pace, ranging from flat year-over-year to 8%, with an average expected growth of 3.5%. As contract rates typically lag spot rates by around six months, an increase in spot rates often precedes an increase in contract rates. The extent of the increase in contract rates will depend on the magnitude of spot market fluctuations in the preceding months.
Intermodal rates
Given the historical lag between intermodal rates and truckload contract rates of about three months, we can expect a similar increase in intermodal rates in 2025. This increase is likely to range from flat year-over-year to 6%, with an expected growth rate of 3%.
Less-than-truckload rates
As mentioned earlier, LTL carriers demonstrate more price discipline and have greater market control compared to truckload carriers, which operate in a highly fragmented market. Furthermore, the Yellow bankruptcy has removed excess capacity from the LTL market, effectively ending the freight recession in that sector. Consequently, we anticipate LTL rates to continue increasing at their average historical growth rate of 3% to 7% year-over-year.
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While imports reached a record high of over 2.5 million twenty-foot equivalent units (TEUs) in September, freight demand remains stagnant, and there is ample capacity in the market. Dry van spot rates decreased slightly in September but were still 2% higher year-over-year.
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Lower unemployment and higher job growth ease recession concerns.
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
October typically experiences a lull in freight market activity, with minimal seasonal pressures except in the Pacific Northwest. There, volumes increase due to Christmas tree shipments, fall harvests, and timber production. By December, the Pacific Northwest market is anticipated to tighten further, alongside the Midwest, Northeast, and West regions. This tightening is attributed to retailers stocking up for the holidays and drivers taking time off.
The U.S. economy is showing signs of stabilization. Consumer prices rose by less than 0.2% for the fifth consecutive month, reaching a year-over-year increase of 2.4%, the lowest since February 2021. The unemployment rate has declined for two months straight, and the economy added 254,000 jobs in September, easing recession concerns.
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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 continues to move towards normalization.
A headwind and a tailwind for freight demand.
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Using data from ACT Research, FTR, the Pickett Line, and Uber Freight’s forecast.
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