U.S. Bank Reports 21% Drop in Freight Shipments: Signs of Challenging Transportation Market
U.S. Bank Reports 21% Drop in Freight Shipments: Signs of Challenging Transportation Market
According to the third-quarter report released by U.S. Bank, freight shipments and shipper spending in the United States transportation market declined 21 percent year-over-year. This decline signals that the bank expects the market's recovery to progress slowly. Bobby Holland, director of Freight Business Analytics at U.S. Bank, noted in the report that while volume and spending contractions have moderated over the past two quarters, the bank is awaiting clear evidence that the market has reached its bottom.
The report showed that third-quarter performance continued to face challenges in terms of freight volume and shipper spending. Compared to the second quarter, shipments declined 1.9 percent while spending fell 1.4 percent. Despite these declines, the slowdown in losses across the indices was viewed as a positive signal for market recovery. Analysts noted that this moderating trend indicates the market is beginning to improve.
Bob Costello, senior vice president and chief economist at the American Trucking Associations, said in a U.S. Bank press release that lower diesel fuel prices and prices not declining further demonstrate that the market is returning to health. The report also noted that while the freight index has been on a downward trend since Q2 2022, the decline in the most recent quarter represented the smallest quarterly drop in more than a year.
Whether the market's recovery trend will continue remains uncertain. Analysts and companies offer differing views on the remainder of the year, with some maintaining recovery expectations while others suggest challenges may persist. DAT Freight & Analytics reported in a market update last week that new contract renewal rates increased 0.9 percent, which could mean potential optimism for carriers and a more inflationary market for shippers. However, dry van spot rates running 9 percent below contract rates suggest the spot market remains weak.
Chad Kennedy, product manager at DAT Group, noted that in October, inflation began affecting dry van shippers in the overall mix but had not yet manifested in reefer and flatbed segments. This indicates that shippers are facing cost increases in dry van transportation, while inflationary pressures have not yet taken hold in reefer and flatbed operations.
Overall, U.S. Bank's Q3 report reveals that the U.S. transportation market continues to face significant challenges and recovery will progress slowly. Declining shipments and falling shipper spending indicate the market has not yet fully recovered, while certain indicators offer hope that the market could enter a healthy recovery phase. How the market will develop in the future will depend on economic conditions and other factors facing the industry.
Key Takeaways:
Shipment and Spending Decline: U.S. Bank's Q3 report showed freight shipments and shipper spending declined 21 percent year-over-year.
Market Recovery: The report signals that market recovery will proceed slowly.
Shipment and Spending Rates: Compared to the second quarter, shipments fell 1.9 percent while spending declined 1.4 percent.
Diesel Fuel Prices: Lower diesel fuel prices signal that the market is returning to health.
Freight Index: The freight index, which has been declining since Q2 2022, showed the smallest decline in the most recent quarter.
New Contract Renewals: DAT Freight & Analytics reported that new contract renewal rates increased 0.9 percent.
Spot Market Condition: Dry van spot rates are trading 9 percent below contract rates, indicating a weak spot market.
Inflation Impact: In October, inflation began affecting dry van shippers, but has not yet impacted reefer and flatbed transportation.
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News Link: https://www.supplychaindive.com/news/q3-us-bank-shipments-spending-index/732159/
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