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Category: Transportation and Logistics

Supply Chain News: Freight Recession May be Coming, but not Here Yet

 

Volumes Slowing but not Contracting - Yet

April 18, 2022
 

As SCDigest reported last week, an analyst from JP Morgan said in a research note that a freight recession soon was “inevitable,” as he downgraded his ratings on the stock prices of a number of carriers. (See Supply Chain Inflation, Trucking Stocks, and the US Economy.)

Supply Chain Digest Says...

 

The Cass Line Haul Index, which measures US per mile truckload rates before fuel surcharge and other accessorials, rose14.2% year-over-year in March to 163.4 after rising 12.7% in February.

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A Bank of American transportation analyst similarly downgraded a large of carrier stocks, helping to send the share price downward by double digits for most carriers over the past few weeks.

JP Morgan added that “truckload market conditions rapidly deteriorated in the back half of March.”

A “freight recession” may in fact be coming, driven by an economy beset by very high inflation and now rising interest rates, and still more global disruption and uncertainty caused by the Ukraine-Russia war.

Cass Information Systems and partner Tim Denoyer of ACT Research are fresh out with their monthly freight report for March, based on data from the billions of dollars of freight bills that Cass pays for its shipper client.

While freight volumes slowed, the data did not show a contraction – yet.

The Cass Shipments Index, which includes multiple loads but is weighted towards full truckload freight, was up just 0.6% year-over-year, slower than the 3.6% growth seen in February.

The shipments index was also up 2.7% versus February, though Cass says that was 1.0% below the normal seasonal pattern.

“We’re certainly seeing a freight slowdown and spot market correction, but in our view, it is too early to call it a freight recession,” the Cass report says.

But freight expenditures were up in March year-over-year, rising 33%. However, Cass says freight rates were down 1.6% on average in the month.



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On a month over month basis, expenditures were down 0.2% in March - basically flat.

The Cass Line Haul Index, which measures US per mile truckload rates before fuel surcharge and other accessorials, rose14.2% year-over-year in March to 163.4 after rising 12.7% in February.

That puts the index at a level of 158, with January 2010 being the baseline period where the index equals 100. That means per mile rates are up 58% since then, or resulting in an average increase of about 3.8%.

But Cass sees pressure on truckload rates, noting that “the key leading indicators from the truckload spot market have fallen sharply over the past several weeks, which we expect will limit further upside in the Cass Truckload Linehaul Index.”

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

 

Source: Cass Information Systems

On overall expectations for the rest of 2022, Cass says “In our view, the combination of inflation, Fed monetary tightening, war in Europe, and substitution back to services from goods are shifting the freight cycle from the early stage to the late stage,” meaning a decline in freight volumes may be coming but not yet.


Any thoughts on a looming freight recession? Let us know your at the Feedback section below.


 
 
 
 
 

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