Both freight rates and volumes ended the year strong but could falter if the economy does

open van trailer
Van rates ended 2020 with an average $2.46 per mile for December 2020, while refrigerated rates fell by three cents to $2.67. Flatbed rates averaged $2.48 on DAT load boards.

Freight numbers rose in December as rates continued their upward climb. The American Trucking Associations (ATA) For-Hire Truck Tonnage Index rose 7.4% in December following a 3.2% increase in November. The index came in at 120 for the month, meaning reported freight volumes in December were 20% higher than they were in the baseline year of 2015.

After a similar gain in September, the index fell in October before rallying for the final two months of the year.

“Tonnage ended last year on a high note,” said Bob Costello, chief economist for ATA. “The index not only registered the largest monthly gain since June, but it also had the first year-over-year increase since March.”

The index was 2.3% higher than in December 2019. The year-over-year comparison, however, wasn’t as positive. For all of 2020, the index was 3.3% lower than the full year 2019. Considering the dismal second quarter of 2020, a 3.3% decline is smaller than most of the analysts predicted.

“Because of the pandemic, 2020 was obviously a very challenging year for the economy overall, and that is reflecting in the tonnage index’s dip from the previous year,” Costello said. “Despite that, truck tonnage clearly outperformed the broader economy as freight continued to move in the face of a myriad of COVID-related challenges faced by the country.”

Costello noted that consumer consumption, inventory restocking by retailers and single-family home construction helped keep shipment volumes high. He also credited the recent stimulus checks and the possibility of another payout for helping keep freight levels high during December and into 2021.

ACT Research also publishes For-Hire Trucking Indexes that measure both volume and freight rates reported in surveys of their customers. Index scores above 50 indicate the market grew, while scores below 50 show a contracting market.

ACT’s Volume Index came in at 55.5 in December, down from 60.4 in November. In the prior six months, the index averaged 67.4, so freight volumes, though slowing, were positive for a total of eight consecutive months.

On the rate side, the Pricing Index for December was 64.2, down 3.6 points from November but still well into positive territory.
Lack of capacity continued to buoy rates, although the rate has been slowing for three months now. The ACT report credits driver hiring and pay increases with helping the industry seat more trucks, creating more capacity and slowing rate increases. The release notes, however, that additional rounds of stimulus and increased unemployment benefits could reduce the number of available drivers, tightening capacity and pushing rates upward again.

ACT also issues a Driver Availability Index, which reached its lowest point ever in December at 28.1. It was the sixth consecutive month of deteriorating driver availability. Rising driver pay and vaccinations may help alleviate the shortage of drivers in 2021, but likely will not be enough.

Cass Information Systems publishes an index too, and like ACT, the breakouts report by volume, rates and other factors. A key difference is that the Cass Freight Index incorporates shipments from different modes of transportation, including rail, ship, barge, air and even pipeline.

In December, the Cass Freight Index for shipments was 1.12, 6.7% better than December 2019 and 1.1% better than November on a seasonally adjusted basis.

Cass also measures freight rates calculated by customer spending and shipping volumes. In December, rates grew faster, 6.0% better than in December 2019. November numbers also bested last year’s November, by 3.0%

Economists at ACT Research, a partner of Cass Information, are predicting a 3.9% growth in GDP for 2021.

Spot rates, which had reached record levels in preceding months, remained high in December, according to DAT Trendlines.

Van rates averaged $2.46 per mile for the month, while refrigerated rates fell by three cents to $2.67. Flatbed rates averaged $2.48 on DAT load boards. Rates for all three categories fell off towards the end of the month as shipping slowed for the holidays.

As the pandemic winds down, both rates and volumes are expected to remain strong at least through the first half of 2021. Consumers are still ordering and buying products, keeping sales high and merchandise moving. The Census Bureau reported fourth-quarter GDP at 4.0%, ending 2020 on a strong note. Durable spending, however, declined in both November and December, but another round of stimulus checks may have added a bounce to begin the new year.

At the time of this writing, the Biden administration has proposed a third round of payments, with Biden saying he wants to move quickly on $1,400 checks to individuals. His proposal includes more money for supplemental unemployment compensation and other benefits to the public. Republicans have proposed a less expensive round of benefits, but the Democrats in Congress have made clear their intention to move quickly, with or without bipartisan support.

A major issue that will certainly impact market recovery is the speed with which vaccinations against COVID-19 can be distributed and administered. The manufacturing and service industries are expected to begin recovery as soon as enough people can get back to work — but that has to happen before yet another round of stimulus is needed to keep the economy going.

Vaccinations will impact driver numbers, too. As CDL schools reopen or expand to pre-COVID capacity, there should be more new drivers coming into the industry. At the same time, increases in driver compensation may slow the rate drivers are leaving.

As it stands, conditions are good for truckers to make money, at least for the first six months of 2021. Those conditions, however, are fragile and could rapidly change if the economy falters or there is a resurgence of COVID-19 cases.

For over 30 years, the objective of The Trucker editorial team has been to produce content focused on truck drivers that is relevant, objective and engaging. After reading this article, feel free to leave a comment about this article or the topics covered in this article for the author or the other readers to enjoy. Let them know what you think! We always enjoy hearing from our readers.


Please enter your comment!
Please enter your name here