News / US trucking still in low gear, as volume and rate decline continues

US trucking business hit new lows since an outbreak of Covid in the second quarter, with volume falling 9% against Q2 22 and spending down 10.9%.

And July brought a further decline in US transport spend and supply chain activity, albeit at a slower pace.

The trucking market contracted for the fourth consecutive quarter from April to June, according to the quarterly US Bank Freight Payment Index, with shipment volume down 9% on a year ago.

According to Bob Costello, chief economist of the American Trucking Associations and author of the report, this marked the biggest contraction since Q2 20, when the outbreak of the pandemic hit economic activity.

Shipment count continued to decline, slipping 1.2% from the first quarter, while shipment spend dropped 8.3%.

The report points to several factors behind the decline. Reduced consumer spend, as consumption shifted from goods to services and inflation sapped purchasing power, has been a major driver. At the same time, manufacturing activity slowed and housing starts lost momentum.

Like consumers, shippers have also been more focused on curtailing spending. The report notes that they increasingly tended to consolidate freight, which reduced overall shipment numbers. In the west of the country, the slowdown in waterborne imports also took a toll on trucking volumes.

Compared with the first quarter, spending retreated across all regions, partly due to lower volumes and trucking capacity exceeding available loads. Lower diesel costs nudged down fuel surcharges, further eroding overall freight spend.

The regional decline ranged from 6.4% in the south-western US to 10.9% in the north-west.

Compared with Q2 22, all but one region registered declining spend, ranging from 2.5% in the south-east to a slump of 18.7% in the Midwest.

The south-west was the only region that saw higher spending, up 4.3%, and also bucked the trend in shipment count, showing gains of 2.9% and 14.8% respectively over the first quarter and Q2 22.

The main driver for this was cross-border trade with Mexico, fuelled by the near-shoring trend. Inbound truck movements from the southern neighbour were up 2.6% on Q1 and up 5% on a year ago.

The Midwest benefited from increased trade with Canada and improved housing starts in the region, but this could not offset the loss in manufacturing momentum, resulting in a 0.5% slip in shipment count from the first quarter and a 9% fall year on year.

The north-west fared the worst, largely due to slower housing starts and reduced consumer spend, which affected the densely populated region more than most other areas. Shipment count fell 9.2% from Q1 and 27.1% year on year, while spend fell 10.9% and 11%, respectively.

July nudged US transport prices further down, but the momentum slowed, according to the Logistics Managers Index, produced in collaboration between Arizona State University. Colorado State University, Florida Atlantic, the University of Nevada and the Council of Supply Chain Management Professionals.

The index dropped to a reading of 35.6, way below the neutral level of 50, but the contraction was milder than in May and June, suggesting that the downward pressure on pricing may be easing.

At the same time, the rise in warehousing costs has slowed, leading to suggestions that this sector may be finally moving towards equilibrium after three years of volatility.

The authors wrote that some companies may be holding back on restocking and some are going back to just-in-time inventory strategies.

The report includes a suggestion that “a broad shift in the market” may be afoot. The authors note that the sub-index for prices jumped 11.5 points from the first half of July to the latter half, and that survey answers on utilisation indicated a similar development.

“This early/late month shift is similar to what we saw in March 2022 when the freight recession began,” they wrote. “A lot would need to happen for transportation markets to recover, but this type of significant movement in metrics would be the first step on that path.”