After easing modestly but steadily since April’s record level, FTR Intel’s Trucking Conditions Index (TCI) in August rose slightly to a reading of 11.63. Freight volume and capacity utilization were not quite as favorable for carriers in August as they were in July, but more strong freight rates resulted in overall stable market conditions. FTR’s TCI forecast sees strong positive readings well into 2022.
“Market conditions in trucking still strongly favor carriers, and we have no real sign of an inflection on the horizon,” Avery Vise, FTR’s VP of trucking, commented. “After healthy—though not especially robust—gains in payroll employment during the summer, trucking job growth was relatively weak in September."
“Meanwhile, the shift of capacity from larger carriers to startups continues, adding to the supply chain disruptions that are bolstering spot market volume and rates for much longer than we would expect in a ‘normal’ hot market like we saw in 2017 and 2018,” Vise added. “Rising diesel prices increase the risks of a swing of capacity back toward larger carriers if spot metrics begin to soften, but we have no indication of that happening yet.”
Freight expectations
According to Cass Transportation, freight demand is anything but stagnant, and has been caged by supply constraints, which are likely peaking with the season.
The extent to which constraints on equipment and driver supply ease in the coming months will largely dictate volume and rate trends. Intermodal volumes have been inching up sequentially in recent weeks as chassis turns improve, and China’s power outages will likely impact exports, so the containership backlog should ease in the coming months. Still, a low inventory/sales ratio and an early Chinese New Year in 2022 starting on February 1st support strong import demand in early 2022.
- Equipment. Semiconductor shortages continue to separate Class 8 tractor production from demand, and trailer supply chain challenges have also limited capacity. Chassis production is still below replacement, but has improved in recent months and improving chassis turns are also helping to reduce rail network congestion.
- Drivers. Though driver capacity is still generally tight, the BLS trucking employment data have improved for four straight months and the ACT Research For-Hire Driver Availability Index continues to recover.
Eventually, improving driver and equipment capacity will help rebalance the market, Cass Transportation reported, but several recent factors, including Hurricane Ida, the Delta variant, and the chip and chassis shortages have been inflationary for freight rates, extending the cycle at the margin. Vaccine mandates and a closed loophole in the FMCSA Drug & Alcohol Clearinghouse are new inflationary risks this month and will challenge the driver recovery.
Freight demand fundamentals remain strong, based on a strong U.S. consumer balance sheet, inventory restocking, and an industrial sector struggling to grow into record orders with infrastructure stimulus likely on the way.
