The various indices tracking freight and logistics were a mixed bag in Q1. But there are definite signs of life, including positive projections for retail imports and freight pricing bouncing off the bottom, as we look ahead to the balance of the year.
The macro picture underscores the importance of accessing comprehensive market data and having an expert resource to help you assess its impacts on your organization, informing decision-making and strategy.
Freight Market Insights
January’s Cass Freight Index showed shipments fell 3.5% sequentially and 7.6% year over year. The latter figure was ahead of a seasonally adjusted -7.2% in December, as the freight recession enters its third year. Similarly, the expenditure component of the Cass index dropped 4% sequentially in January and 24% year over year. But imports have been growing at Los Angeles and Long Beach. Both saw TEU volume up over 60% year-over-year in February, as shippers rebalance supply chains in the face of potential East and Gulf coast issues.
The American Trucking Association’s For-Hire Truck Tonnage Index was down 3.5% in January, after increasing 1.2% in December. “January’s data was a snap back to reality for anyone thinking the freight market was about to turn the corner,” said ATA Chief Economist Bob Costello. He cited poor contributions from retail sales, housing starts, and manufacturing output.
Even with lots of trucking capacity removed, it hasn’t been enough to normalize the market balance. But freight pricing has taken a turn north, according to the Logistics Managers Index (LMI). The LMI was at 56.5 in February; any number above 50 indicates expansion. It was also the sixth time in seven months that the LMI expanded, even though it was below the historic average of 62.4.
Things are looking brighter for less-than-truckload (LTL) pricing than for truckload (TL). According to the February Producer Price Index (PPI) from the Bureau of Labor Statistics, TL rates in February were 12% above February 2020, but down 11% year over year. By comparison, LTL rates were up 26% from February 2020, and up 3.4% year over year. Jason Miller, a professor of supply chain management at Michigan State University, sees LTL past a pricing bottom, and TL there now, presaging an end of downward pricing pressure and growth in demand.
Retail Projects Import Growth; Unemployment Rises
In another positive sign, retailers are fueling import demand. The monthly Global Port Tracker (GPT) from the National Retail Federation (NRF) and Hackett Associates estimated U.S. retail imports will grow 7.8% for the first six months of 2024. This is an upward revision from a +5.3% projection last month.
The GPT is projecting February’s cargo volume at 1.9 million TEU, up 22.7% year over year, while March is forecast at 1.77 million TEU, up 8.8% from last year. This shows the resilience of shippers and the freight market, despite the ongoing disruption of the Red Sea passage due to rebel attacks and the Panama Canal drought.
The U.S. added 275,000 jobs in February, according to the Bureau of Labor Statistics (BLS), ahead of projections and more than the 229,000 jobs gained in January. Despite this, the unemployment rate ticked up from 3.7% last month to 3.9%, the highest level since January 2022. While transportation and warehousing employment grew by 20,000 in February, it has shed 144,000 jobs from its peak in July 2022. In the subcategory of warehousing and storage, 7,000 jobs were lost last month.
A rule change from the Federal Motor Carrier Safety Association (FMCSA) will make it easier for drivers to obtain a CDL, hopefully easing the shortage. Those with a CDL learner’s permit no longer have to train in the same state where they take the CDL skills test.
Fed Leaves Rates Unchanged; Services Sector Prospects Strong
The Consumer Price Index (CPI) rose 0.4% in February and is up 3.2% over the past 12 months. In its March meeting, the Fed left the benchmark rate unchanged at 5.33%, leaving off “quantitative easing” for now. While the Fed believes delaying a rate cut is helping ward off inflation, that has not proven to be the case. The cumulative rate of inflation since 2020 is roughly 20%; economists from the National Bureau of Economic Research pegged it at 24%, with an 18% increase in 2023. This is despite a Fed rate cut to near zero in April 2020, followed by a gradual rise from March 2022 until reaching its current level in August.
GDP growth in Q4 came in at 3.2%, below expectations of 3.3%. Despite persistent inflation, consumer spending was up 3% in the quarter, above an earlier estimate of 2.8%.
The services sector received positive news when the Services PMI from the Institute for Supply Management (ISM) registered 52.6% in February. Like the LMI, any reading above 50 indicates expansion. While a slight dip from 53.4% in January, the PMI has been in positive territory for 44 of the past 45 months.
The nearshoring of manufacturing to Mexico, to hedge against China's exposure and supply chain shocks, is for real and spurring trucking demand from south of the border. This has led to more cross-border cooperation, and carriers and logistics firms building out infrastructure to support the growth.
As Q1 Closes With Hopeful Signs, Look For a Strong Freight Partner to Help You Navigate the Rest of 2024
There are signs of a thaw in the long freight recession – indicated by pricing growth – retailers are signaling imports will be up in the first half, and GDP growth was solid in Q4. Yet inflation continues to drive spending levels, with energy and food costs gaining the most in February. Another bright spot: the nearshoring trend is benefiting both shippers and the logistics firms supporting it.
For companies shipping over-dimensional freight, there are specific requirements based on the goods being shipped, including permitting and regulatory compliance. Wicker Park Logistics, with a strong track record in this highly specialized area, can handle all your over-dimensional shipping needs. We also bring a consultative approach to each engagement, shaping a custom solution based on your needs, and in the context of market conditions. Speak to an expert today.
