ACT Research freight forecast: Pre-ship provides respite from freight downturn

The ACT Truckload Rate Gauge improved this month on better freight volume, though it still favors shippers with a -3 reading. (Courtesy: ACT RESEARCH)

COLUMBUS, Ind. — Officials at ACT Research said Monday that for the past few months, ACT had been expecting pre-tariff shipping to ramp up ahead of the List 4 tariffs and this month’s OUTLOOK report presents a plethora of evidence that inventory building is the main factor behind the recent uptick in freight.

The “ACT Freight Forecast, U.S. Rate and Volume OUTLOOK covers the truckload, intermodal, LTL and last mile sectors of the industry.

With the temporary nature of this tailwind, ACT Research maintained its view that truckload and intermodal contract rates will fall this year as a result of overcapacity and weak freight demand, while LTL pricing will stay positive.

“We now expect another soft patch in freight when the current inventory build turns to a draw, likely this winter after tariffs are imposed,” said Tim Denoyer, ACT Research’s vice president and senior analyst. “This is similar to the dynamic of last year, but the main difference is that capacity has loosened materially. Truck sales have not softened yet, and amid ongoing excess capacity, this will hurt truckers’ negotiating position just as discussions begin for next year’s bid season.”

U.S. Class 8 tractor order intake was down about 90% year-over-year in July and August, off record levels a year ago, but OEMs still have not meaningfully lowered production rates and new truck inventories are at all-time highs.

While backlogs are quickly thinning, carriers are still spending aggressively and adding to capacity.

“We remain very concerned about a variety of adverse economic consequences of U.S. trade policy, from the inverted yield curve to the industrial downturn to lower confidence and elevated uncertainty, not just inventory swings,” Denover said. “While recession is still not our base case, risks are heightened.”

The ACT Truckload Rate Gauge improved this month on better freight volume, though it still favors shippers with a -3 reading.

The coming decline in U.S. Class 8 tractor build rates should begin to bring the supply side a little more into balance, but inventory distortions are expected to become a headwind for freight in early 2020, pushing the gauge back to -6, Denover said.

The Truckload Rate Gauge is ACT’s measure of trucking industry supply/demand, balancing changes in the number of active trucks and the amount of available freight.

“The current gauge gives us a good directional feel for spot today and contract in about six months, and the Six Months Out gauge tells us about spot in six months and contract in about a year,” Denover said.

The ACT Freight Forecast provides quarterly forecasts for the direction of volumes and contract rates through 2020 and annual forecasts through 2021 for the truckload, less-than-truckload and intermodal segments of the transportation industry.

For the truckload spot market, the report provides forecasts for the next 12 months.

ACT Research is a publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasts for the North America and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies

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