Pickett Research, LLC

Despite seeing our first Y/Y inflationary print (revised down to close at +0.6% for Q3 2024) for the US TL Spot Linehaul Index in over two years (Q1 2022), the theme in recent months was ‘Not so fast!’ with the market seemingly stuck in neutral heading into October as the Q3 mark revised steadily lower over the course of the quarter. And boy was that tested, as we then went on to navigate through two major hurricanes, a short-lived port strike, and an increasingly loud and divisive run-up to the US presidential election. And the net impact of all of that…at least so far…is a preliminary Q4 print of +3.0% Y/Y vs. a forecast of +7.5% Y/Y +- 5.0%. ? Should this Q4 mark hold up through subsequent revisions and quarter close, it would confirm the inflationary transition and with that the end of one cycle (Cycle 5: Q3 2020-Q2 2024, 16Q) and the beginning of a new one (Cycle 6: Q3 2024-TBD). And from a spot market rate standpoint, it would further signal the end of the freight recession. Though without a meaningful demand catalyst, it may not immediately feel like it for many Carriers and Brokers. That said, from here we are maintaining our current guidance for Q4 to reach +7.5% Y/Y (+4.2% from our current position) and Q1 2025 to reach +15.0% Y/Y (+13.6% from current levels). ? The Q3 Cass Linehaul (Contract) Index revised flat to close at -3.3% Y/Y vs. a forecast of -1.0%. We continue to expect to break Y/Y inflationary by Q1 2025 before going on to peak somewhere in the neighborhood of +10.0% Y/Y by early 2026. ? The September macro print was once again mixed with Consumption pointing higher and Industrial Production pointing lower. Preliminary Q3 Consumption came in at +3.0% Y/Y vs. last quarter’s +2.7% Y/Y, continuing its slow march higher from Q1’s +2.3% Y/Y. Beneath the surface, we saw moderate improvement across the board with Durable Goods consumption up another 100 bps to +3.6% Y/Y after Q1’s big decline to +1.2% Y/Y from Q4’s +5.8%. Nondurable Goods notched higher to +2.3% Y/Y and Services picked up 20 bps to +3.1% Y/Y. Q3 Industrial Production closed at -1.1% Y/Y vs. the prior quarter’s 0.0% and the weakest print since Q1 2021. The Q3 Inventory-to-Sales ratio revised flat to 1.37, where it has held for now the 5th consecutive quarter. And diesel prices are tracking to close 3 cents per gallon higher ($3.585/gal) in October, making up for a portion of the -14 cent decline in September. ? So while progress has been slow, the US TL Spot Linehaul Index continues to grind along and, so far at least, is confirming last quarter’s Y/Y inflationary break after mostly brushing off an October that included two major hurricanes and a short-lived East & Gulf Coast port strike. Though the next test will be today's US Presidential Election and both the economy and TL market’s response to the outcome. All that and more in this special September 2024 election day edition of The Pickett Line. Here's the excerpt... #freightrates #trucking #freight #economy

Move over Hollywood Chrises, the Freight Market Chrises are taking the virtual stage November 12th 11am PT/1pm CT to assess the post-election landscape and the outlook for US truckload spot & contract linehaul rates going into 2025. Will the historical cycle persist? If so, what will drive the pace and magnitude of the Y/Y spot market recovery in progress? Join Chris Caplice (Chief Scientist at DAT Freight & Analytics) and Chris Pickett (CCO at Flock Freight & Lead Analyst at Pickett Research, LLC) in a session moderated by Nick Boston (VP Sales at GoodShip) as they dive in. Please join if you can by registering with the link in the first comment.

After the June issue reported the first Y/Y inflationary print for the US TL Linehaul Spot Index in over two years (Q1 2022), last month's fade from +3.0% to +1.2% Y/Y inspired the theme of ‘Not so fast!’. And this month only brought more of the same as we sank even further to a lighter but still inflationary +0.6% Y/Y on the quarter and now feeling 'Stuck in neutral'. The Q3 Cass Linehaul (Contract) Index revised lower to -3.3% Y/Y vs. -3.0% last month after closing Q2 at -2.7% and well below the revised forecast line of -1.0%. We continue to expect to break Y/Y inflationary in Q4 and then go on to peak at ~10.0% Y/Y by late 2025 or early 2026. The August macro picture came in mixed but mostly negative, in line with July. Revised Q2 Consumption held flat at last month’s +2.7% Y/Y, confirming a more pronounced correction higher from Q1’s +2.3% Y/Y and restoring its trajectory to one of ‘up and to the right’. Beneath the surface, we saw slight improvement across the board with Durable Goods consumption up another 10 bps to +2.6% Y/Y after Q1’s big decline to +1.2% Y/Y from Q4’s +5.8%. Nondurable Goods held at +1.9% Y/Y and Services faded 10 bps to +2.9% Y/Y. After posting its most constructive print in six quarters at +0.2% Y/Y in Q2, Industrial Production’s most recent update revised that down to 0.0% while revising Q3 down 10 bps from last month to -0.4%. The Q3 Inventory-to-Sales ratio opened at 1.37, where it has held for now the 5th consecutive quarter. After our volume demand indicators swapped directions again last month, we continued the pattern this month. Q3 Cass Shipments revised to -2.4% Y/Y from -3.6% Y/Y and vs. Q2’s -5.3% Y/Y while ATA TL Volume remains at -3.6% Y/Y vs. Q2’s -2.9% until we get the next update. And finally, diesel prices continued their slide lower and now sit at $3.561/gal through September MTD and its lowest level since Q4 2021. So despite the constructive first revisions to Q2 Consumption and preliminary read on the Q3 Cass Shipments Index, just about every other market and macro indicator signaled weakness over the last two months. Though now with a catastrophic storm in the Southeast to recover and rebuild from and a looming port strike, increased market volatility could take spot TL rates at least moderately higher in the weeks ahead. And with interest rates and inflation both headed lower, the recovery in industrial activity (to support resilient US Consumption) that we’ve been waiting for could finally be coming as well. So the weeks ahead will be interesting to say the least as the Spot TL Linehaul Index struggles to stay inflationary?and positioned to kick off the next rate cycle going into 2025. Onward we go in this August 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy

After last month’s first Y/Y inflationary print (+3.0% for Q3 2024) for the US TL Linehaul Spot Index in over two years (Q1 2022), the theme this month is ‘Not so fast!’ as we revised down to a lighter but still inflationary +1.2% Y/Y on the quarter with the market fading lower through most of August. But as noted last month, should it hold up through subsequent revisions and quarter close, it would signal the ending of one cycle (Cycle 5: Q3 2020-Q2 2024, 16Q) and the beginning of a new one (Cycle 6: Q3 2024-TBD). And at least from a spot market rate standpoint, it would signal the end of the freight recession…or at least the beginning of the end. Though depending on what happens with capacity demand, it may not immediately feel like it for many Suppliers.?From here, given the softening post-July 4th spot market and continued weakness in Industrial Production we are taking guidance down through the end of the year as follows: +10.0% Y/Y to +3.0% in Q3 and +20.0% Y/Y to +10.0% in Q4 which would imply a +1.7% run higher from here to close the quarter and +15-20% higher by the end of the year. The July macro picture came in mixed but mostly negative, contrary to June’s more constructive read. Revised Q2 Consumption bumped 20 bps higher to +2.7% Y/Y, representing a more pronounced correction higher from Q1’s +2.3% Y/Y and restoring its trajectory to one of ‘up and to the right’. Beneath the surface, we saw improvement across the board with Durable Goods consumption up 10 bps to +2.5% Y/Y after Q1’s big decline to +1.2% Y/Y from Q4’s +5.8%. Nondurable Goods consumption notched 20 bps higher to 1.9% Y/Y and Services gained another 20 bps to +3.0% Y/Y and its highest mark in two years. After posting its most constructive print in six quarters at +0.2% Y/Y in Q2, Industrial Production came out of the gate soft in Q3 with a preliminary read of -0.3%. And the Q2 Inventory to Sales Ratio revised a point higher to close at 1.38, where it has been range-bound between 1.37 and 1.40 for the last six quarters. Our volume demand indicators swapped directions again, with Q3 Cass Shipments opening higher at -3.6% Y/Y vs. Q2’s -5.3% Y/Y while ATA TL Volume took a step lower with Q3 opening at -3.6% Y/Y vs. Q2’s -2.9%. And finally, diesel prices gave back all of July’s +2.4% gain to land at $3.716/gal through August MTD. So despite the constructive first revision to Q2 Consumption and preliminary read on the Q3 Cass Shipments Index, just about every other market and macro indicator signaled weakness last month. Though, as is always the case, we’ll have to see where this next month takes us before drawing too many conclusions on the likely shape of our rate curves and the pace of the TL spot market recovery, as well as the broader economy, from here.?Read all about it in the July 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy

The June 2024 issue of The Pickett Line is out and it was a big month to report on. We've got a number of mostly constructive developments to unpack, the highlight being a preliminary Q3 2024 US TL Spot Linehaul print of +3.0% Y/Y – our first inflationary mark since Q1 2022. Should it hold through subsequent revisions and quarter close, it will signal the ending of one cycle (Cycle 5: Q3 2020-Q2 2024, 16Q) and the beginning of a new one (Cycle 6: Q3 2024-TBD). And at least from a spot market linehaul rate standpoint, it would signal the end of the freight recession. Though depending on what happens with Demand, it may not immediately feel like it for many on the Supply side.?From here, we maintain our current Spot TL Linehaul Rate guidance for +10.0% Y/Y in Q3 and +20.0% Y/Y in Q4 which would imply a +5-7% run higher from here to close the current quarter and +20% higher by the end of the year. Preliminary Q2 Consumption opened at +2.5% Y/Y, representing a correction higher from Q1’s +2.3% Y/Y and restoring its trajectory to one of 'up and to the right'. Beneath the surface, we also saw a meaningful bounce higher in Durable Goods consumption to +2.4% Y/Y after Q1’s big decline to +1.2% Y/Y from Q4’s +5.8%. Q2 Industrial Production posted its most constructive print in six quarters at +0.4% Y/Y, signaling the possibility of a sustained move higher in the months and quarters ahead to once again converge with the Consumption line. And the Q2 Inventory to Sales Ratio revised to hold flat at 1.37?where it has been stuck since Q2 2023. So despite the recent relative softness in goods consumption and signal of a slowing economy overall, we still see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. And with the June updates summarized here correcting for some of that softness, this remains the case. Though as stated last month, while the rate of capacity flight is enough in our estimate to get the inflationary leg of the next Spot TL rate cycle going, we are going to need to see a meaningful and sustained improvement in industrial activity in the quarters ahead to drive the market to +30-40% Y/Y as in past cycles. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy

With May and most of June now in the books, we find ourselves roughly where we started the year coming out of January – with a Q2 US TL Spot Linehaul Index print within 2% of equilibrium and accelerating. While January posted a preliminary Q1 print of -1.1% Y/Y before turning over and fading back to -6.7% to close the quarter, we believe our current Q2 mark of -1.8% is going to have a little more staying power. That said, with less than two weeks to go in the quarter, we don’t expect to close the quarter Y/Y inflationary as forecasted at +5.0% +- 5.0%. So we are pushing our forecast line ahead once again and now expect to finally break inflationary in Q3, after 9 long quarters of deflationary correction, to kick off the next 3-4 year TL rate cycle. And given the tepid action observed in industrial activity so far this year, coupled with weak Q1 Durable Goods Consumption data, we are taking our forecasted inflationary peaks down 10 pps to +40.0% Y/Y in Spot (Q2 2025) and 5 pps to +10% Y/Y in Contract (Q3 2025). Though we are keeping the projected cycle duration unchanged at 14 quarters, as compared to the current cycle’s 16 quarter expected run. So in summary, our revised Q2 2024 Spot Linehaul Index is now sitting at -1.8% Y/Y vs. a forecast of +5.0% Y/Y +- 5.0% and a revised forecast of -1.5% Y/Y. And our Contract Linehaul Index (Cass) is at -2.3% Y/Y vs. a forecast of -3.0%. And we now project a +5-10% sequential Spot Linehaul Index move in Q3 from our current position and a +20-30% move by the end of the year given the revision forward by a quarter. The May macro picture came in mixed once again, though remains mostly constructive. Q1 Consumption revised slightly lower to +2.3% Y/Y vs. +2.4% last month. And beneath the surface we saw another revision lower for Q1 durable goods consumption – down to +1.3% Y/Y vs. +2.0% last month and +5.8% in the prior quarter. If that trajectory holds going forward, we expect any meaningful recovery in industrial activity to struggle with regard to timing and magnitude. That said, we did see a +0.9% sequential improvement in Industrial Production in May taking the revised Q2 read to just barely inflationary at +0.1% Y/Y. The Inventory to Sales ratio opened Q2 flat at 1.37 where it has been stuck since Q4 2023. So despite the recent softness in goods consumption and signal of a slowing economy overall, we still see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. But while, in our estimate, the rate of capacity flight is enough to get the inflationary leg of the next Spot TL rate cycle going, we are going to need to see a meaningful improvement in industrial activity in the next few quarters to drive the market to +30-40% Y/Y as in past cycles. All that and more in this May 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy

After February’s Saint Valentine’s Day [TL Spot Market]?Massacre took our Spot Linehaul index down 11 cents to $1.67/mi, our index slid another 6 cents in March to a current cycle low of $1.61 and remained there through April and now halfway through May. This made for a final Q1 2024 mark of -6.1% Y/Y vs. a revised forecast of -5.0% and a preliminary Q2 mark of -5.3% Y/Y vs. a forecast of +5.0%. That said, spot rates did start to grind higher the week before CVSA International Roadcheck week, a trend that we expect to continue through the end of the quarter. We don’t believe we’ll close the entire gap to Q2 forecast, but think there’s a good chance we close the quarter at least +5% higher from here to break Y/Y inflationary for the first time since Q1 2022. The Contract (Cass) Linehaul Index closed Q1 slightly higher at -5.3% Y/Y vs. a forecast of -5.0% so right on track there. Our forecast line continues to project -3.0% Y/Y in Q2 before breaking Y/Y inflationary in Q3 and going on to surge higher through the end of the year and into 2025. So despite increasingly challenging market conditions, asset-based motor carriers have continued to find a way to operate while taking spot rates lower and lower. But we believe the end is near for enough of them to begin driving spot linehaul rates higher going forward with a gradually improving TL capacity demand picture acting as a secondary catalyst as we kick off the next 3-4 year TL rate cycle in the coming months. That said, the macro picture at this moment in time remains mixed though is constructive overall. The preliminary read on Q1 2024 Consumption remained healthy at +2.4% (vs. +2.7% in Q4 2023) but beneath the surface we saw a material slowdown in durable goods consumption – down to +2.0% Y/Y vs. +5.8% in the prior quarter. But we’ll be watching closely through subsequent revisions to see where we ultimately land before drawing too many conclusions about the state of the Consumer. Industrial Production closed the quarter flat to last month at -0.3% Y/Y and relative inventory levels improved slightly as the inventory-to-sales ratio revised down to 1.38 from last month’s 1.39 (vs. last quarter’s 1.37). So while signals continue to contradict and confound from month to month, we still see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. So on to May we go. We unpack it all in this April 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement

Congratulations to Ryan Soskin David Tsai Nick Boston Paige LaNasa and all of our friends at GoodShip on their recently announced Series A. The momentum is building and the timing couldn't be better. As the US truckload market cycle flips Y/Y inflationary in the quarters ahead for the first time since 2020 (as we'll continue to highlight in upcoming issues of The Pickett Line), the supply chains that can adapt the quickest and most effectively will outperform their slower-moving competitors. But you can't change what you can't see. The GoodShip platform enables both, finally addressing the blind spot that exists between most enterprise procurement and TMS applications. Identify. Act. Evaluate. Repeat. Huge milestone GoodShip team. Onward.

After February’s Saint Valentine’s Day [TL Spot Market]?Massacre took our Spot Linehaul index down 12 cents to $1.66/mi, the index slid another 5 cents in March to a current cycle low of $1.61 and remains flat now almost halfway through April. This made for a final Q1 2024 mark of -6.1% Y/Y vs. a revised forecast of -5.0%. The Contract (Cass) Linehaul Index revised slightly higher to -5.4% Y/Y vs. a forecast of -5.0%. So despite increasingly challenging market conditions, motor carriers are somehow finding a way to operate while taking spot rates lower and lower. Though we believe the turn is coming soon as unprofitable operators continue to exit the market (including some larger fleets more recently), diesel prices begin to march higher, and seasonal demand patterns return. Preliminary Q2 2024 retail diesel prices broke Y/Y inflationary for the first time since Q1 2023 at +2.3% with WTI crude oil trends signaling further increases ahead. And a revised Q1 2024 Cass Shipments (Demand) Index is so far showing a strong rebound off of the Q4 2023 deflationary bottom – recovering from -8.6% to -6.2% Y/Y. Should these trends hold in the months ahead, with both diesel and TL capacity demand pointing up and to the right for the first time since late 2020, then we should expect Spot TL rates to follow suit just as in past cycles. So while Q2 2024 has gotten off to a fairly tepid start, with our Spot TL Linehaul Index currently sitting at -4.1%, we continue to project the spot market to break Y/Y inflationary this quarter with a forecast of +5.0% Y/Y before running increasingly higher through the end of the year and putting this current freight recession of historic proportions finally behind us…for now. This would equate to a +8.7% sequential rise from current levels. Contract rates likely correct slightly higher but remain Y/Y deflationary at -3.0% in Q2, before following spot rates higher over the back half of 2024 and into 2025. The macro picture was mixed, though constructive overall. Consumption levels remain strong while Industrial Production and relative Inventory Levels continue to show weakness. So we’ll be watching these relationships closely in the months ahead as we look to build conviction around the overall direction of the economy and the demand-side forces that help drive the TL Linehaul rate cycle. But overall, we continue to see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. Though We’ll find out soon enough. All that and more in this March 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement

Well, that escalated quickly. The big news last month was the steep decline in spot market TL rates. After four months of steadily increasing Spot TL Linehaul rates as the index bounced off its deflationary cycle inflection point last Q1 2023, February brought a 12-cent (-6.5%) retreat back to a blended 1.66/mile. In fact, the drop was so violent – even considering the market softness that typically comes with the 2nd month of the year –?that we’ve dubbed February The Saint Valentine’s Day [TL spot market] Massacre. ? Was it the last gasp of an increasingly exhausted supply base now running on fumes? Or something more structural and therefore permanent in nature? Given the rest of our macro and micro market indicators, at this point we believe the former. But regardless, given the magnitude of the move and the impact it had on the Q1 2024 US TL Spot Linehaul Index, we no longer project the spot market to break Y/Y inflationary as previously expected and have shifted both the Spot and the Contract forecast lines forward by a quarter. ? That said, the Q1 Spot Index revised from -1.1% Y/Y in January down to -6.1% Y/Y vs. a revised forecast of -5.0% and compared to the previous quarter’s -9.8%. So still pointing up and to the right toward inflation land, but we’re no longer knocking on the door as reported last month. The revised forecast now shows us breaking inflationary next quarter at +5.0% Y/Y and running +30-40% higher by the end of the year, but not peaking until Q2 2025. ? Given the historical relationship between the contract and spot markets, we’ve shifted our US Contract TL Linehaul rate (Cass) forecast line forward by a quarter as well to continue to trail the spot line. ? After declining -15.5% from September 2023 to January 2024, retail diesel prices turned +4.9% higher to close back above $4/gal at $4.044. They remain stable in March MTD.?So it wasn’t falling diesel prices that allowed the supply side to take spot rates lower in February. ? Just about every other macro indicator posted or revised higher last month. Q4 2023 Consumption revised higher to +2.7% Y/Y, Industrial Production inched 10 bps higher to open Q1 2024 flat at 0.0% Y/Y, and the Q4 Inventory to Sales ratio held flat close the quarter at 1.37 – all generally constructive signs for the US economy, future industrial activity, and therefore the demand side of the truckload market equation. ? So coming into March, the question will be whether February was a short-term deflationary anomaly or signal that the supply surplus that clearly still remains in the market is going to be more resilient and much slower to exit than in past cycles. But with spot rates tanking ~7% while diesel prices rose ~5% in February, perhaps this month will be the real test.?We unpack it all in the latest February 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement