The Cass Freight Report for June was released late last week, and it showed trucking volumes were down sharply versus May and year-over-year, with rates down even more than the drop in freight movements.
Surpply Chain Digest Says...
|
 |
However, Denoyer adds, there is one key ingredient missing in a normal bottoming phase, which is lower equipment production.
|
 |
What do you say? |
| Click here to send us your comments |
 |
| |
|
The monthly report from Cass and partner Tim Denoyer of ACT Research is based on data from the billions of dollars of freight bills that Cass pays for its shipper clients.
The Cass shipjments index, which covers several modes but is weighed towards full truckload, was down 1.9% month-over-month on a seasonally adjusted basis. It was also down 4.7% versus June 2022.
Denoyer says that freight markets remain in a downcycle, which saw its first year-over-year decline 18 mponths ago. The past three downcycles have ranged from 21 to 28 months in length.
"Declining real retail sales trends and ongoing destocking remain the primary headwinds to freight volumes, but dynamics are shifting as real incomes improve and the worst of the destock is in the rearview,"Denoyer writes.
The report also notes that in seasonally adjusted terms, the index is now 12% below the December 2021 the peak of the up cycle peak, which is slightly greater than the peak-to-trough declines in two of the three downcycles in the past dozen years.
The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, fell 2.6% versus May and 24.5% year-over in June. So shipments were down 4.7% in the month versus 2022, while freight spend fell much more (24.5%), implying a big drop in rates.
Denoyer says that "The expenditures component of the Cass Freight Index rose 23% in 2022, after a record 38% increase in 2021, but is set to decline about 17% in 2023, assuming normal seasonal patterns from here. With both freight volume and rates under pressure at this point in the cycle, that assumption is likely optimistic, so we may be looking at about a 20% decline in freight spending this year," which is likely to be 4-5 times the percentage drop in volmes
Another look at rates comes from the Cass Linehaul Index, which measures US per mile truckload rates before fuel surcharge and other accessorials.
In June the index fell 14.1% year-over-year. That follows a 15.3% decline in May. The index also fell 0.4% from last month after a 2.6% drop in May.
Cass notes that as a broad truckload market indicator, the index includes both spot and contract freight, and that with spot rates already down significantly, the larger contract market is likely to continue adjusting down.
(See More Below)
Looking at the US freight market as a whole, Denoyer says that "The volume downturn appears to be in the later innings, and after a long soft patch, we see the US freight transportation industry on the cusp of a new cycle. We characterize this phase of the cycle as the bottoming phase."
However, Denoyer adds, there is one key ingredient missing in a normal bottoming phase, which is lower equipment production.
"As Class 8 build rates remain elevated, pressure remains on fleets to seat these tractors," Denoyer says.
So shippers should enjoy more months of low and falling rates.
Each month, Cass nicely summarizes the state of freight, as seen in the graphic below for June:
n
Source: Cass Information Systems
Any thoughts on this month's Cass report? Let us know your thoughts at the Feedback section below.
|
