Transfix Take Podcast: Week of July 5
Fourth of July Bursts With Rising Rejections, Rates
As expected, the end of June/beginning of July brought rising tender rejections and rates throughout the country. Nationwide rejections jumped back near all-time highs, closing June at around 27%.
With the Fourth of July in the rearview mirror, this week could bring new insights into coming summer trends. “Last year, markets were actually tighter coming out of the July 4 weekend, but that was an anomaly,” says Justin Maze, Transfix’s senior manager of carrier account management. “Traditionally, rates start to deflate coming off peaks. We expect spot freight requests to rise through this first week of July. The market will, most likely, remain tight for the next day or so, but it will then slightly soften, similar to the trend line we saw after Memorial Day.”
Georgia markets are still incredibly tight, but things may start calming down in Savannah, which could help bring some much-needed relief. On the other side of the country, Southern California markets are heating up, with capacity reflecting the jump in tender rejections. SoCal long-haul tenders are also starting to rise again, which could be an indicator of a coming market shift.
“We are still in a carrier-favored market in most of the country, especially in the major freight markets, where shippers are struggling with capacity issues,” Maze says. “There are pockets of looser capacity in the Midwest, Northeast and Pacific Northwest, but this may not last. Our carrier partners tell us they are seeking good load quality, better transit and decreased dwell times in exchange for offering better-quality capacity to shippers.”
Monitoring Global Health to Avoid Shutdown Déjà Vu
Imports remain the area to watch, with no signs of slowing at any U.S. ports. Both coasts are welcoming huge amounts of imported goods, with consumer demand showing only the slightest decline month over month. Even as inventories build back larger than they were pre-COVID, inventory-to-sales ratios are still lower than at any point in history. Experts in different parts of the supply chain report fears on the part of most large retailers about what inventory will look like in Q4. This is also reflected in many ocean-freight metrics.
“As the U.S. strives to get back to some level of normalcy, many countries are not having the same success fighting COVID-19,” Maze points out. “Last week, some countries in Asia, including Taiwan and Bangladesh, announced new mandatory lockdowns due to deadly COVID-19 variants. This could have further implications to our supply chains — much like we saw last year when China went into lockdown, closing factories and stopping exports. We could see disrupted markets again if imports slow due to these shutdowns, and that could force expedited OTR services when delayed imports start again, similar to Q4 of 2020. We at Transfix are monitoring the situation in Asia and worldwide to ensure we are ready for whatever comes.”
June Employment Numbers Show More — Yes, More — Truck Drivers
Is the driver shortage finally beginning to wane?
“In the June employment report released Friday morning by the Bureau of Labor Statistics, total jobs in truck transportation on a seasonally adjusted basis rose 6,400 jobs in June to 1,486,500 jobs,” John Kingston wrote for FreightWaves. “That figure in recent months has risen by only a small amount or, in some cases, declined, despite the help-wanted signs, higher pay and sign-on bonuses in truck carriers all over the country.” The number for not-seasonally adjusted jobs grew by 24,500 for the month to 1,501,600 jobs.
This sounds like great news, but do take it with a grain of salt: Trucking employment typically does increase for the summer months, so we’ll need to keep an eye on the numbers to see if this trend continues past the season.
Manufacturing Down Slightly MoM, but Still Growing
U.S. manufacturing decreased slightly in June, according to the Institute for Supply Management’s (ISM) Manufacturing ISM Report on Business. The ISM Purchasing Managers’ Index (PMI) for June registered 60.6%, a decrease of 0.6 of a percentage point from the May reading of 61.2%.
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 June reading marked a 13th consecutive month of expansion.
The New Orders Index came in at 66%, decreasing 1 percentage point from May. The Production Index registered 60.8%, an increase of 2.3 percentage points from May’s 58.5%. The Prices Index registered 92.1%, up 4.1 percentage points from May’s figure of 88% — the index’s highest reading since July 1979.
“Manufacturing performed well for the 13th straight month, with demand, consumption and inputs registering growth compared to May,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. “Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor. Continued high backlog levels, too low customers’ inventories and record raw-materials lead times are being reported. Labor challenges across the entire value chain continue to be the major obstacles to increasing growth.”
SA Truck Tonnage Index Down in May, Up YoY
The American Trucking Associations’ (ATA) advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 0.7% in May, while it was up 3.7% year over year. The May 2021 index equaled 113.7 (2015=100), compared with 114.5 in April.
“Tonnage, despite falling slightly over the last two months, remains well above the lows of last year,” said ATA Chief Economist Bob Costello. “This is no small deal considering that truck tonnage fell significantly less than many other indicators during the depths of the pandemic in the spring of 2020.”
“One freight segment that is helping tonnage is gasoline, as demand for travel, both commuting and vacation related, picks up,” he said. “I’m also expecting retail freight to remain robust, as inventories are at historic lows. As retail stocks are rebuilt, it will boost freight. As has been the case for some time, trucking’s biggest challenges are not on the demand side, but on the supply side, including difficulty finding qualified drivers.”
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 113.8 in May, 0.2% below the April level of 114. ATA’s For-Hire Truck Tonnage Index is dominated by contract freight, as opposed to spot market freight.
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.