Those who were hoping that freight rates might begin to rebound in August were disappointed — and the disappointment is likely to continue for a few more months.
Average dry van spot rates increased slightly in August, up just 0.7% from July numbers, according to DAT Trendlines. Compared with August of 2022, however, dry van rates fell a more dramatic 17.7%.
The number of available trucks has continued to grow while the number of loads has not, resulting in a decline of 19.9% in DAT’s load-to-truck ratio. More trucks competing for fewer loads drives rates downward. The average spot rate for dry van was $2.08 per mile in August, according to DAT.
On the temperature-controlled side, rates increased 2.6% from July but were down 13.9% from August 2022, as the load-to-truck ratio dropped by 37.8%. Spot rates averaged $2.50 for refrigerated trailers in August.
The flatbed load-to-truck ratio was even worse, declining by 57.2% compared with August 2022. Flatbed spot rates fell 1.1% from July rates and 17.6% from August 2022 rates. The average spot rate for flatbed freight in August was $2.50, according to DAT.
Fuel costs rose by 12.6% during August but are still 12.8% lower than in August 2022.
Loads posted on the Truckstop.com board in August followed a similar trajectory, as reported by FTR Transportation Intelligence. The board reported some rate increases due to the Labor Day holiday but reported that average rates were still 21% lower than the five-year average for that holiday week.
According to the Motive Monthly Economic Report, key metrics in retail visits improved in August. Motive’s data points differ from other analysts in that its data is compiled using GPS information collected from trucks that utilize their equipment, counting actual truck visits to retailers and other statistically valuable locations.
Motive reported that retail visits were higher in August compared with August 2022, a good sign that the economy is beginning to show signs of growth.
At the same time, the number of new carrier registrations with the Federal Motor Carrier Safety Administration grew in August, while carrier exits declined sharply. This means more trucks are engaging in the hunt for freight, helping keep rates low.
The Motive report also indicates that rising diesel prices and increasing costs for credit will add difficulty for smaller trucking operations.
The report states that Motive expects the overall contraction (the removal of trucks from the marketplace) to continue into early 2024, and truck owners are advised to prioritize operational efficiency. Conserving cash is the best defense a small business has against difficult business periods.
“Destocking” is a work that has been frequently used during the freight downturn.
Simply put, it means retail establishments and manufacturers have been ordering less product to restock their shelves in response to slowed sales. By measuring the number of truck visits to distribution centers for the top 50 retailers, Motive can create its “Big Box Retail Index.”
The index for August didn’t quite make it to July levels, primarily because of the July 4 holiday; however, the index rose 8.1% from the June level.
Motive sees the increasing number of visits as a sign that retailer inventories are “normalizing.” Orders slowed while they were reducing their stock of product, but they are now ordering enough to maintain the lower inventory numbers.
At a recent industry conference hosted by ACT Research, the firm’s vice president and senior analyst Tim Denoyer claimed that the freight market is “getting close to finding supply and demand balance.”
In the trucking industry, “supply” indicates the availability of trucks and “demand” is the number of loads available to fill them.
Denoyer predicted that freight rates will begin rising in the fourth quarter of 2023, which begins the date of this issue of The Trucker. If this happens, it will be welcome news to the thousands upon thousands of small trucking companies that are currently competing for freight. The industry could receive another boost if efforts by the Federal Reserve to curtail inflation are successful in reducing inflation without stifling production.
In the meantime, a recent study released by ATRI (the American Trucking Research Institute) pegged the cost of operating a truck at $2.25 per mile, a figure that’s higher than many spot loads are currently paying. Successful truck and small fleet owners will pay close attention to the rates they accept, planning ahead for the next load or two as well.
It pays to avoid taking loads into regions where outbound rates are hard to come by and priced on the low end of the spectrum when found.
Some truck owners may have to adjust their home time expectations in order to take advantage of higher freight rates. The upcoming holidays can present another opportunity for good rates as many drivers shut down for days during holiday weeks, resulting in fewer trucks on the road and rates that may be temporarily higher.
If there’s any good news, it’s that the recession that many economists expected has fizzled and may not happen at all. The tricky part will be staying above water on business expenses until freight rates begin climbing again.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
How is it that the “recession that many experts predicted has fizzled”? The optimist side of me says,ok my neighbor lost his job,and so did my other neighbor,but I haven t,so WE are ok.
No we are not,I d say WE are in one side of a recession.
I like blaming politicians even if they are not directly responsible,however seeing that corpse walking,falling and barely able to express a coherent thought,ugh! if I was a dollar,I d grow legs and leave the U.S. in a hurry.
America needs to stop enabling Ukraine proxy war with Russia they are draining our country