Transfix Take Podcast: Episode 3

Plateaus at Elevated Levels Will Give Way to Tighter Capacity

As the midpoint of June passed, we saw minimal differences week over week in most freight markets. We are seeing slight increases in van tender rejections, and volumes are fluctuating, but rates are staying fairly flat, albeit at elevated levels. Markets along the southern border, from California to the Southeast, continue to be the tightest, while the Northeast and Midwest offer the most capacity for shippers. While the reefer market is very volatile, and tightness is widespread throughout the country, shippers are able to find some relief in falling tender-rejection rates.

“We will start to see capacity tighten toward the end of this week, with the end of the month and the Fourth of July holiday getting closer,” says Justin Maze, Transfix’s senior manager of carrier account management. “A few of the nation’s largest retailers are having flash sales — all at the same time (see more on this below). These will, most likely, only have a limited impact on the market. We are already running in overdrive, but they will put an even stronger emphasis on building inventory, something retailers have been struggling with during the past year.”

 

Reading Retail for Market Movement

The U.S. Census Bureau reported last week that overall retail sales in May were down 1.3% from April. Experts don’t seem to be too concerned.

“Month-over-month comparisons and percentages of change simply don’t tell the story,” National Retail Federation (NRF) Chief Economist Jack Kleinhenz says. “We are at a highly elevated level of spending, with dollar amounts in recent months some of the highest we’ve ever seen. Long-term trends in the number of dollars spent tell much more about the continuing economic recovery than whether sales were up or down from month to month. Retail sales as calculated by NRF were the second highest on record in May, topped only by holiday spending in December. Demand has continued to be strong even as the concentrated impact from government stimulus has faded. There is still pent-up demand for retail goods, and consumers are likely to remain on a growth path into the summer.”

We are starting to see a slight shift in consumer behavior as the country reopens. With consumers getting out more, we expect to see trends such as restaurant spending surpassing grocery spending for the first time since the pandemic started. Even with stimulus checks in the rearview mirror, consumer spending is still high, but confidence and spending behavior will continue to shift. 

“In terms of freight, do not worry,” Maze says. “The retail inventory-to-sales ratio is still short of where retailers need it to be, which is why there are plenty of imports on their way to the U.S. We will continue to see strong freight volumes for some time, with imports surging at the top 10 U.S. ports. We could also see stronger month-over-month retail numbers for June, as Amazon Prime Day comes right at the end of the month. In addition to Amazon, competitors, such as Walmart, Target and BestBuy, will run similar sales to counter the success of Prime Day. These types of huge industry-wide sales drive a need to replenish inventory, so the freight will keep the market moving.”

 

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.

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