Transfix Take Podcast (Week of Aug 9)
Treading High Water Ahead of Peak Season
Don’t expect any major market shifts this coming week, unless the truckload market starts to see the flow of imports that have been pouring into the ports on both coasts. On Friday, the Outbound Tender Volume Index (OTVI) sat at 48.84, while the Outbound Tender Rejection Index (OTRI) dropped to 20.8. Even with decreases in both tender volumes and rejections, rates managed to rise slightly. However, none of these measures have been significant enough to shift the tide in major markets. Despite lower volume, we continue to see national load to truck ratios (LTRs) rise, a result of market capacity struggling with demand. Capacity and rates are already trending higher this month than during the previous two.
We are starting to see a drop in longer haul volume and a shortening of the average length of haul since July, but we believe this will reverse through August. Continuing trends include a struggle for capacity in the Northeast, especially on freight heading into the South. The Midwest has started to pick up a little more heat in its larger freight markets, including Chicago, Juliet, Indianapolis and Columbus. Shippers should take advantage of markets in the Southeast, where rates continue downward. Carriers are still pushing capacity toward the West, so shippers can also take advantage of the stagnant market there before it flips.
While volumes, rejections and rates are at extreme highs, we are in a calmer market right now, and shippers should act to take advantage of it. This calm will disappear within weeks, as we head into a peak shipping season, and the coming holidays bring a ton of freight into the truckload market. This year, it will affect different markets in different ways than in the past, as shippers spread out imports and shift them to the East Coast to avoid congestion on the West Coast. Spot container rates certainly reflect the buildup in the West, and multiple metrics stand out for ocean and air freight. Retailers are continuing their efforts to restock inventory, with American consumers not slowing down their spending.
Manufacturing Down MoM, but PMI Marks 14th Month of Growth
U.S. manufacturing decreased slightly again in July, according to the Institute for Supply Management’s (ISM) Manufacturing ISM Report on Business. The ISM Purchasing Managers’ Index (PMI) for July registered 59.5%, a decrease of 1.1 percentage points from June’s 60.6.%. The PMI, a monthly survey of supply chain managers across 19 industries, is a measure of the direction of economic trends in manufacturing. An index higher than 50% indicates growth, so the July reading marked a 14th consecutive month of expansion.
“Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. “As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products. Worker absenteeism, short-term shutdowns due to parts shortages and difficulties in filling open positions continue to be issues limiting manufacturing-growth potential.”
Diesel Prices at Three-Year High
Nationwide average diesel prices hit their highest average since October 2018. According to the U.S. Energy Information Administration’s weekly Gasoline and Diesel Fuel Update, the week ending Aug. 2 saw a 2.5-cent increase to the U.S.’ average price for a gallon of on-highway diesel, which is now $3.367.
California saw the largest week-over-week increase, with a jump of 6.7 cents to $4.271 per gallon — the nation’s most expensive diesel.
More unknowns are happening every day around the COVID-19 pandemic, and we know this translates directly to unknowns in the freight market. The pandemic’s unpredictable disruptions are not over. Transfix is here to help our carrier and shipper partners prepare. We are continually monitoring even tangentially related markets and data to develop the most forward-thinking perspective on the future freight market.
With the uncertainty and volatility surrounding the U.S. economic recovery, shippers need a partner that can help them adapt and excel — no matter the circumstance. Shippers turn to Transfix for our leading technology and reliable carrier network. As volumes drive higher, we are here to help: Learn more about our Core Carrier program and Dynamic Lane Rates. As part of our ongoing market coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.