‘State of Freight’ for April: Overcapacity, weak spot rates

FreightWaves’ Zach Strickland, Craig Fuller and Adam Josephson discuss the freight market during the April “State of Freight” webinar. (Photo: FreightWaves) FreightWaves CEO and founder Craig Fuller described the rest-of-the-year outlook for the freight environment as “uncertain” during Thursday’s “State of Freight” webinar for April. “I have heard a lot of arguments about folks that are bullish about the state of freight,” Fuller said. “I have yet to find a piece of data that actually suggests that there is an argument made for being bullish.” The panel also featured FreightWaves market expert Zach Strickland and Adam Josephson, senior vertical expert. Here are five takeaways from the April webinar: OTVI shows truckload volume is flat Fuller said the current data from FreightWaves’ Outbound Tender Volume Index (OTVI) remains mostly flat, with little seasonality or truckload flows. “I think in a normal year, you would have seen a March build, a limited drop-off in April — building really up until Easter, but we’ve not seen any level of seasonality,” Fuller said. “It suggests that the produce season isn’t producing, construction is not driving demand, retailers aren’t driving demand. It’s just a really flat year.” FreightWaves market expert Zach Strickland pointed out that the OTVI data could also be read with some optimism. “It’s still flat, which I can actually make the argument that is positive, considering we’re not falling,” Strickland said. Outbound tender volumes are well below 2021 and 2022 levels: SONAR: OTVI.USA: 2023 (blue), 2022 (pink) and 2021 (green). To learn more about FreightWaves SONAR, click here. Fuller agreed that the data does have some silver linings. “It’s a positive from the standpoint that there are no boom-and-bust cycles,” he said. “In fact, if you’re a shipper and you’re running a supply chain, it’s actually an incredibly positive thing for you, because it means that you’re not having to deal with trucks not showing up, or all the instability that you deal with in a volatile market. However, it is the enemy of the brokers and unfortunately for the carriers, because that lack of volatility is in a very loose market that’s oversupplied with capacity.” Inflation is cooling consumer spending In recent months, inflation has spurred consumers to cut down on discretionary spending, Josephson said. “If you listen to what the retailers have been saying, starting even a year ago, Walmart and Target and others started talking about the shift away from discretionary items toward essential items,” he said. “Costco just talked about recently as well that their sales momentum has slowed quite considerably. They said quite clearly that their customers are still buying food, packaged and fresh foods, but they’re not buying discretionary items.” Josephson said the reason people have less disposable income is the higher cost of services and dwindling savings. “There’s this concept of excess savings that the Federal Reserve, JP Morgan and others talked about, that excess savings got built up because of all the government stimulus checks,” Josephson said. “Those excess savings have been whittled down. People have less and less money to spend; they’re not making money after the impact of inflation.” Fuller said there is a correlation between a person’s average weekly earnings declining and the trend of falling freight volumes. “The reason is that the people who are consuming the goods that move through the freight market are the folks that live paycheck to paycheck or live inside that market where they’re not investing money in the economy,” Fuller said. “These are the folks that are most impacted.” Inbound ocean containers to the US have fallen dramatically Strickland said that FreightWaves’ Inbound Ocean TEUs Volume Index (IOTI) is “arguably one of our better leading indicators for understanding what’s coming.” Fuller said the IOTI data is indicating that retailers are not ordering more inventory at the moment. “If retailers are restocking, because 75% of what moves on ocean containers is related to consumers, predominantly retail goods, if we’re seeing a situation where retailers believe that there’s going to be demand, then they start restocking,” Fuller said. “We’re just not seeing it; it’s very flat right now.” The Inbound Ocean TEUs Volume Index (IOTI) shows that container volumes to the U.S. are way down compared to 2021 (green) and 2022 (purple). To learn more about FreightWaves SONAR, Fuller noted that Henry Byers, FreightWaves’ head of ocean intelligence, predicted the deterioration of ocean import container volumes in an article he wrote in June 2022. “This is the part that really threw people off last year: […]

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