Conditions Likely to Continue to Favor Carriers

35.3% - That was the year-over-year growth in the Cass Shipments Index in May, a record jump for a single month. The index tracks shipment levels across multiple modes, but is oriented towards full truckload freight. It follows a 27.6% rise in the index in April, which at the time was also a record increae before being eclipsed by the May number.

Supply Chain Digest Says...   On a month-over-month basis, the seasonally adjusted truckload price index was 1.7% higher than April, making it eleventh straight increases. What do you say? Click here to send us your comments Click here to see reader feedback

However, the comparison is off weak 2020 May numbers, as freight really dropped off in that month after the pandemic began in the US in March of that year.

Still, Cass notes that "It’s safe to say the pandemic recovery is progressing much faster than the recovery from the Great Recession."

At 1.269, the May Cass shipments index was the second-best result in its long history, behind only May 2018. The baseline is January 1990, when the index is pegged at 100.

On a seasonally adjusted basis, the shipments index surged 5.9% month over month in May from April.

Cass also produces an index on freight transportation expenditures, which grew at its fastest pace ever on a year-over-year basis in May, up 49.9%, accelerating from 45.1% year-over-year growth in April. However, May faced the easiest comparison of the pandemic quarantine period, meaning tougher comparisons in the coming months will slow these year-over-year increases essentially regardless of freight fundamentals, Cass says.

Cass produces an “implied” freight rate change analysis by dividing expenditures by shipment levels. If expenditures are rising more rapidly that shipment, it can be assumed rates are rising, and the reverse.

Using that method, Cass says rates actually fell 7.8% on a seasonally adjusted, month over month basis in May, following a 3.4% increase in April.

Still, Cass notes that "The [research firm] ACT Freight Forecast report this month fixates quite a bit on the timing of the peak of the rate cycle, but we don’t think this is it."

In fact, Cass observes that the significant month-over-month drop in May was not likely due to market conditions, which by most accounts, including the Cass Truckload Linehaul Index, continued to increase.

"Rather, our sense is the modal mix within the index was the cause of the slowdown," Cass says- for example, more freight moving from truck to rail.

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The Cass Truckload Linehaul Index, which tracks US contract truckload rates before fuel surcharges and other accessorials, came in at 149.0 in May. represented a third consecutive all-time record and accelerated to a 14.1% year-over-year increase from a 13.0% increase in April. On a month-over-month basis, the seasonally adjusted index was 1.7% higher than April, making it eleventh straight increases.

US freight rates simply continue to head higher. The index baseline (index = 100) is from January 1990. That means that at a level of 149.0, contract US truckload rates are up 49% from 1990 until now, 31 years later.

Cass adds thaat "With strong freight demand and on-going supply constraints in both of the critical components of trucking capacity (drivers and tractors), the trend of the Cass Truckload Linehaul Index should remain up in the near-term."

Each month, Cass nicely summatizes the state of freight, as seen in the graphic below for May:

Source: Cass Information Sytems

Concluding, Css notes that while market fundamentals continue to favor carriers, a pull back in rates is inevitable.

"With enough time, we believe the cure for high prices is high prices," Cass says.

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