Market Update - June 2023

As the summer heat rises, so too does the pace in our world of logistics! But hey, don't sweat it - we've got you covered! This month, we're serving up refreshing insights about everything from truckload supply and demand to consumer sentiment, all to help you stay cool while shipping your orders across the country. Some of the trends we're seeing are hotter than a June sunburn. So, grab your sunblock and let's dive into the waves that are making a splash in the freight market.

1. Monitor Seasonal Demand: Keep an eye on the seasonal demand trends, especially around holidays. This can help you anticipate rate hikes and plan your logistics accordingly.
2. Stay Informed About Market Conditions: The gap between spot and contract rates is large, exerting downward pressure on contract rates. Stay informed about these market conditions to negotiate better contracts.
3. Watch Out for Authority Revocations: With a significant number of authority revocations taking place, it's crucial to ensure your third-party transportation providers are reliable and have the necessary authority to operate.
4. Consider the Impact of Manufacturing Sector: The contraction in the manufacturing sector for the seventh straight month could pose a potential downside demand risk. Adjust your logistics and transportation plans accordingly.
5. Keep an Eye on Consumer Sentiment: Retail imports are rising, and the labor market remains relatively healthy. These factors could influence consumer spending and, in turn, impact truckload demand.

Truckload Supply & Demand

The summer peak season is upon us, and it's causing some volatility in the spot market. However, it seems to be having minimal disruption to contractual service levels. The gap between spot and contract rates remains large, which is exerting downward pressure on contract rates.

Seasonal demand is believed to be responsible for recent rate hikes, and it's expected that both will settle following the July Fourth holiday. This is particularly true in regions significantly impacted by the summer peak season and produce demand surges.

Despite the poor trucking conditions, the capacity correction continues. Seasonal volatility leading to higher spot market rates could ultimately extend equilibrium conditions as carriers look to stay afloat.

Capacity & Volume Outlook

The outlook for freight demand remains unchanged. It's encouraging to see strong consumer spending even as interest rates rise. However, large numbers of authority revocations are taking place. In the first five months of last year, ten for-hire trucking firms with 100 or more trucks lost authority. During the same period in 2023, 31 carriers with 100 or more trucks lost authority.

Trucking employment continues to defy expectations by rising in recent months. However, revisions to prior reports indicate employment is below January levels. The manufacturing sector was expected to be a key demand driver in 2023, but it just contracted for the seventh straight month, increasing potential downside demand risk.

Truckload Rates

The recent spot market surge highlighted a return to normal seasonal demand patterns. Tender rejection activity below 3% illustrates historically strong contract compliance and carriers’ appetite for accepting nearly all contract freight despite increased spot activity. The gap between spot and contract rates for van and reefer equipment has closed to $0.50 and $0.35 per mile, respectively, but downward contract rate pressure should continue.

Consumer Sentiment

The National Retail Federation reports that retail imports are rising; however, first-half imports are down 22% year-over-year. Initial jobless claims and the unemployment rate indicate the labor market remained relatively healthy in May, bolstering confidence in consumers’ ability to maintain spending and prevent rapid truckload demand declines.

If you found this update as refreshing as a dip in the pool on a scorching summer day, then I’d love to hear about it. Remember, the freight market is a dynamic and ever-changing landscape. To help you stay even cooler, fully informed, and confidently ahead of the heat, I’ve got you covered with your very own customized market update tailored to your specific shipping needs.

Just grab your shades, send me a message, and let's dive into your world of logistics together. Stay cool, make waves, and keep those shipments moving!