Freight Waves | End of Year Shaping Up just Fine for Carriers

10.06.17 | Brian Straight, Freight Waves

Spot rates continue to climb and capacity continues to shrink, and now experts are predicting a strong holiday retail season. Could the good news for carriers get any better?

DAT reported that spot rates rose once again last week, with van rates climbing another 3 cents to $1.97 per mile. Flatbed rates were up 2 cents to $2.27 per mile and refrigerated rates inched up a penny to $2.23 per mile. The van load to truck ratio is at a seven-year high, climbing 9.5% last week and is up 120% over September 2016 at 7 loads per truck. Capacity continues to shrink, falling 3.2% for the week ending Sept. 30.

For the month of September, the van spot rate rose 18 cents.

DAT attributed the continued rate increases to supply chain disruptions due to Hurricanes Irma and Harvey along with continued economic growth and a strong harvest season.

Contract rates have begun to rise as fleets and shippers engage in negotiations for 2018, with some indication of rate jumps as much as 10% or more in some instances. The implementation of electronic logging devices in December remains a great unknown, though. C.J. Driscoll & Associates recently conducted a survey of carriers and owner-operators and found that 60% of carriers and none of 20 owner-operators surveyed had installed ELDs yet.

There are other data points that continue to paint a positive picture for trucking.

“In addition to the recent activity, the outlook for continued capacity constraints as we move into 2018 is starting to make a significant impression,” Jonathan Starks, COO of FTR, wrote in a recent blog post. “Over the last year, while posted loads have more than doubled, truck availability has seen a 1/3 reduction. This has put the Market Demand Index (MDI) at record levels - surpassing the high levels seen during the winter of 2014. And this was even prior to the hurricane impacts. It has only gotten tighter from there.”

There are some data FTR tracks that are showing a mixed bag, though. Consumer confidence slipped slightly in September, according to the Conference Board’s index of consumer sentiment. It fell to 119.8 in September, down from August’s 120.4. Some of that, FTR noted, can be attributed to the hurricanes that hit Florida and Texas.

“The recent hurricanes have created some uncertainty and likely helped lower the index,” FTR’s Steve Graham wrote on the company’s blog page. “Rebuilding efforts will help offset the decline in economic activity ad help shore up confidence. Economic data in August came in weaker than expected and September’s reports also will show some impact from the storms. Generally, the rebuilding from natural disasters offsets the losses, but that could take several quarters.”

U.S. economic activity also slowed in August, falling to -0.31, down from July’s 0.03 reading, and new home sales fell in August, dropping 3.4% month-over-month and 1.2% from year ago. Pending home sales also dropped in August, down 2.6% from August 2016.

“Sales fell to an annual pace of 560,000 in August,” Graham said. “With the market starting to slacken, the median new house price also fell to $302,059, down 7.5% in August, but still up 0.5% from a year earlier. Hurricane Harvey had a hand in slowing August sales, but the sales pace likely would have [fallen] anyway. The industry appears to have slowed just as the supply is increasing. The market for existing homes is still tight.”

There are some bright moments, though, FTR pointed out. “New orders for durable goods increased 1.7% in August, a larger than expected gain and total orders are 5% higher than a year earlier. Core capital goods orders rose 0.9% excluding civilian aircraft and shipments rose 0.7%. Autos and parts orders rose 1.5%, but the road ahead for autos is soft.”

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