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November numbers look promising: Analysts say freight volumes and rates should remain high for a while longer

November numbers look promising: Analysts say freight volumes and rates should remain high for a while longer
Both capacity and freight levels rose during November, resulting in favorable conditions for trucking, according to analysts.

Data for the final month of 2021 isn’t in yet, but November turned out to be a good month for both freight volumes and rates.

The American Trucking Associations (ATA) says tonnage reported by its member carriers pushed the organization’s freight index up 1.3% over October levels. The ATA For-Hire Truck Tonnage Index equaled 114.5 in November. The ATA index is based on volumes reported in 2015, meaning the November 2021 index was 14.5% higher than the 2015 average.

The November rise followed a smaller 0.4% increase in October.

“November’s gain was the fourth straight, totaling 4.3%, and the tonnage level was the highest since April,” said Bob Costello, chief economist for ATA. “The recent streak is very good, but it should be noted that from April through July the index fell a total of 4.6%, so we are not quite back to where we were last spring. With that said, the index saw the largest gain from a year earlier since May. In November, strong factory output and housing starts helped push the index higher.”

The ATA Index is compiled using data submitted by member carriers and represents primarily contract truckload freight.

In August 2021, ATA released its “U.S. Freight Transportation Forecast 2021 to 2032.” The forecast predicts freight volumes will end 2021 up 7.4% after falling 6.8% in 2020 and will continue climbing for the foreseeable future.

Indexes published by industry analyst and forecaster ACT Research were all in positive territory for November. The firm’s Fleet Capacity Index was in positive territory for the first time in a year, indicating some easing of the capacity constraints that have pushed rates upward.

The Capacity Index may have received an assist from delays in implementing vaccine mandates for drivers as government concerns grew over the contribution of the driver shortage to supply chain issues.

“Led by better driver availability, the Capacity Index increased 6.1 points in November, to 54.6 (SA), the best result since May 2019 in a sharp deviation from the trend of the past two years,” explained Tim Denoyer, ACT vice president and senior analyst. “Exemptions from vaccine mandates for most truck driving jobs may aid hiring at the margin, though dock capacity will likely be strained.”

ACT’s Pricing Index rose by 1.1 points in November.

Omnitracs

“While capacity remains tight and rates continue to rise, the increase in driver availability indicates gradual rebalancing in the market has begun,” Denoyer said.

However, while capacity was increasing during the month, freight levels also increased, resulting in another strong month for ACT’s Supply-Demand Balance Index, which showed another month of demand outpacing supply.

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“Significant unmet demand remains in equipment markets, and the near-term outlook for freight volume remains positive,” noted Denoyer.

Another industry analyst and forecaster, Cass Information Systems, reported that its Freight Index for Shipments increased 1.4% in November over October levels. At the same time, the Cass Index for Expenditures grew 8% over October, indicating that the rise in freight rates hasn’t peaked yet.

The Cass report notes that freight capacity remains constrained — and it’s not only trucking that can’t provide enough transportation to meet the demand. Container ships remain backed up outside of U.S. ports, and rail is experiencing many of the same issues as trucking.

The Cass index incorporates air, barge and pipeline shipments as well as ship, rail and trucking. The Cass release forecast a total 37% increase in freight expenditures for the year 2021, with the final results coming once the December data is in. The year 2022 is predicted to see another 18% to 20% increase in expenditures, boding well for freight rates in coming months.

Truckstop.com reported that, as expected, freight volumes dropped during Thanksgiving week but were still more than double those posted in the same week of 2020. Also reported, total average spot rates were 19% higher than during the same week the previous year, but a little over half of the increase was due to fuel surcharges that compensate for fuel price increases over the past year.

Truckstop.com reported average freight rates of $2.97 per mile to end the month with rates for refrigerated freight coming in highest at $3.44 per mile. The firm noted that average rates have been above $2.40 per mile for 65 consecutive weeks.

Trucking services provider DAT reported spot rate increases for both van and refrigerated freight in November, with van freight averaging $2.92 per mile and refrigerated freight $3.44 per mile. Flatbed rates were down a few cents from October at $3.05 per mile.

Spot rates for all three trucking types rose again in December to end the year on a high note.

In a Dec. 14 blog entry by DAT’s Dean Croke, principal analyst for DAT iQ, DAT reported that truckload freight rates have almost doubled in the past 18 months since the 2020 “May Day” protest in Washington, when truckers were protesting low freight rates and a lack of broker transparency.

Within 16 weeks of the May Day protests, Croke noted, diesel fuel prices had dropped by 34 cents per gallon and freight rates had risen to a level higher than at any point in 2018. More than 100,000 new DOT numbers were issued, Croke reported, representing 32% of all trucks added to the market.

DAT data suggests that more than 25% of total trucking volume is comprised of spot-market freight. That’s more than twice the percentage of spot-market freight in the average year before the COVID-19 pandemic. With capacity remaining constrained and contract rates also on the rise, the trucking boon should continue for the coming months.

Fuel costs remain a concern to most in the industry, and the Omicron variant of the COVID-19 virus is an unknown factor. If more shutdowns and restraints are put in place to combat the virus, freight volumes — and rates — could drop quickly.

The market will eventually reverse course and conditions for trucking will become more difficult, because that what happens in the economic ups and downs of trucking. Until then, however, there are more months of prosperity to be enjoyed.

Cliff Abbott

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.

Avatar for Cliff Abbott
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.
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