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Crosswinds threaten soft landing

This week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers) Last week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers) Three-month FreightWaves Supply Chain Pricing Power Index Outlook: 35 (Shippers) The FreightWaves Supply Chain Pricing Power Index uses the analytics and data in FreightWaves SONAR to analyze the market and estimate the negotiating power for rates between shippers and carriers. This week’s Pricing Power Index is based on the following indicators: A sleep and a forgetting Freight demand has returned with a vengeance, as the flow of accepted volumes is outpaced even the booming years of 2021 and 2022 (the latter of which saw an unseasonably active Q1 before heralding the current downturn and recovery). Great news but, before any champagne gets popped, numerous caveats must be made. First, as will be discussed in more detail below, tender rejections are languishing at substandard levels. When I write that shippers have been energetic in the first two weeks of 2024, carriers and brokers will likely scratch their heads — and rightfully so. The sustained imbalance between supply and demand has yet to be corrected, such that only an unprecedented tidal wave of demand could satisfy the current amount of capacity in the national freight economy. To hope for anything beyond precedent after these wild past few years is reckless, to say the least. Second, we have only now shaken off the holiday lull that curbed truckload activity, so it would be hasty to draw any far-reaching conclusions just yet. Finally, although there are many positive signs for domestic freight demand in the not-too-distant future, there are also numerous headwinds varying in strength for 2024. Tender volumes see a quick recovery from the holiday lull : SONAR: OTVI.USA: 2024 (white), 2023 (blue) and 2022 (green) To learn more about FreightWaves SONAR , click here . This week, the Outbound Tender Volume Index (OTVI), which measures national freight demand by shippers’ requests for capacity, rose 5% year over year (y/y). Weekly comps are not extremely informative at present, given the battery of winter holidays over the past few weeks. That said, y/y comparisons can be colored by significant shifts in tender rejections. OTVI, which includes both accepted and rejected tenders, can be inflated by an uptick in the Outbound Tender Reject Index (OTRI). Accepted volumes are edging out last year : SONAR: CLAV.USA: 2024 (white), 2023 (blue) and 2022 (green) To learn more about FreightWaves SONAR , click here . Contract Load Accepted Volume is an index that measures accepted load volumes moving under contracted agreements. In short, it is similar to OTVI but without the rejected tenders. Looking at accepted tender volumes, we see a rise of 6.88% y/y. This positive y/y difference implies that actual freight flow is recovering from this cycle’s bottom. With August 2022’s signing of the Inflation Reduction Act as well as the CHIPS and Science Act, manufacturing firms have been offered over $250 billion worth of tax credits and other incentives to catalyze reshoring operations. Yet while there is a bevy of such projects fueled by government spending near at hand, the industrial sector has been slow to recover from its current depression. According to data from the Institute for Supply Management, December marked 14 consecutive months of contraction in the manufacturing sector. In a similarly conflicting vein, the December jobs report revealed a labor market that was far hotter than consensus expectations, casting doubt on the possibility of near-term interest rate cuts from the Federal Reserve. In December, the U.S. added a staggering 216,000 jobs, far above both the consensus growth forecast of 175,000 and even the high-end estimates of 190,000. Still, the month secured easy comps against October and November, both months for which initial payroll readings were revised substantially lower. Confusion mounts, however, when turning to the report’s Household Survey, which tracks the number of newly employed persons rather than newly created positions. According to December’s Household Survey, the number of employed workers tumbled by 683,000 — the largest monthly drop since April 2020, when the global economy grappled with unprecedented lockdowns. That December was a weak month for job growth is not surprising in itself, since the month consistently ranks as the second-most popular month for job cuts. But the question that remains unanswered is how the Fed will interpret this report at its next meeting in late January, and whether it will walk back some of its previously dovish messaging. Inflation data from last month will likely persuade the Fed to […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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