The Transfix Take Podcast: Week of July 26
Softening Markets Ahead of End-of-Month Push
Last week drove along a flat road without any large national freight market shifts, still reflecting a mostly softening market. However, capacity in the Northeast tightened, as did capacity in the Midwest, though mainly for freight within the region. Freight going back to the West has seen the most loosening, possibly an early sign of what is to come, as carriers are willing to take lower rates to get there.
“Most of the other major markets have continued to soften, even as spot volumes rebounded from a few weeks ago, coming in at 51% higher YoY,” says Justin Maze, Transfix’s senior manager of carrier account management. “Shippers should be on the lookout for freight they need to move via rail out of the West Coast, as many rail providers are facing large backlogs and jams, with some even shutting down entire lines for a week to deal with the congestion.
“This week, shippers should start preparing for tighter capacity, as we gear up for the end-of-month push. Volumes show no signs of slowing — the Outbound Tender Volume Index (OTVI) sat Friday at 15,477.52 — with higher retail numbers in June than most analysts predicted and no improvement in sales-to-inventory levels as we inch closer to Q4 peak retail.”
Preview of August — and Beyond
“It’s hard to predict where the markets will be when we drive through the rest of Q3,” Maze says. “Some believe we will see the traditional breathing period before the peak retail season, but I think markets will stay flat before they increase, considering the volume of imports that will start moving. Consumer spending is already up ahead of peak spending season. Markets in the Northeast and Midwest are heating up faster than expected, and signs on the West Coast point to the stronger volume coming sooner. Plus, the rail issues could shift more freight to over-the-road (OTR) or disrupt where freight ends up, which translates to a need for OTR support.”
As we’ve mentioned for the past couple of weeks, we are also keeping an eye on what’s happening with the pandemic globally. Some retailers are starting to feel an inventory crunch due to manufacturers closing in countries that are fighting outbreaks.
“On top of port congestion, container and pallet availability, and tight transportation capacity, apparel brands are now navigating the worst COVID outbreaks of the pandemic in major export countries in Southeast Asia,” Andrew Cox wrote in his “Point of Sale” newsletter for FreightWaves. “Start shopping now!”
Closures in Asia could easily lead to freight issues here in the coming months, causing small disruptions and pushing for more expedited freight during the Q4 peak season.
Contract Freight Tonnage Down in June
The American Trucking Association’s (ATA) advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 1.5% in June, following a 1% decrease in May.
“Tonnage has definitely flattened out, on average, over the last six to nine months,” said ATA Chief Economist Bob Costello. “The good news is that it remains slightly above 2020 levels.” The June index of 111.6 (2015=100) was up 0.5% YoY.
“Supply chain issues are likely putting some downward pressure on tonnage,” he said. “But it is also likely that tonnage isn’t growing as much as it could because of industry-specific supply constraints. This index is dominated by contract freight, and the for-hire truckload carriers have seen their tractor counts fall because they are having difficulty finding qualified drivers. It is difficult to move more tonnage with less equipment, which is why we are seeing strong volumes in the spot market, as shippers scramble to get loads moved.”
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