Synopsis: Will this freight surge continue after the Fourth? Consumer spending data says yes
Despite data collected this week that indicated a balance of pricing power between shippers and carriers, FreightWaves projected a shift that should favor carriers throughout the next three months. Using the DHL Supply Chain Pricing Power Index and FreightWaves’ SONAR forecasting platform, the news outlet analyzed information based on the following influential factors: load volumes, tender rejections, spot rates, economic stats, and transportation stock indices.
As export volumes rapidly increased for many areas around the U.S., another new peak was recorded according to the Outbound Tender Volume Index (OTVI). Rising above 12,000, this spike marked the second since March of this year when consumer panic led to a huge increase in demand. To give readers a little more context, this OTVI was 8% higher than 2018’s peak (which was already considered a record high year for freight volumes) and represented an unprecedented demand for freight.
Another major factor that affected the supply and demand of freight was the high number of tender carriers rejected. Just like the peaks in OTVI, the Outbound Tender Rejection Index (OTRI) similarly recorded a large jump of over 400 points last week. Coming in at 11.2%, this OTRI was also one of the highest points recorded in recent history since earlier in March and the summer of 2018.
With carriers trying to make up for lost time and searching for ways to capitalize on the current freight surge, the increases in rejected contracted rates produced higher spot volumes. As a result, spot rates shot up to almost reach 2019 numbers. However, even though the majority of lanes were showing positive growth, increases in COVID-19 cases throughout the U.S. and the approaching slowdown that’s expected to happen after July 4 could effectively put a stop to this trend.
An additional telling sign FreightWaves used for its data analysis was last week’s initial jobless claims, which were reported as a little higher than expected at 1.5 million. While this number was still extremely high and equated to more than two times the peak recorded during the 2008 recession, initial claims seem to have finally reached their height and are now on the decline. Unemployment also fell by 767,000 to reach 19.5 million.
In other news, consumer spending stabilized and appears to be on its way to reaching a positive year-over-year number (especially for retail (ex-autos) based on credit card data obtained from the Bank of America Merrill Lynch. When you consider that consumers are receiving government aid and states are now reopening, though, it’s hard to gauge if consumer spending will continue to look like this in the long term.
Transportation Stock Indices
Lastly, transportation stock indices weren’t very promising this past week but offered more of a positive for carrier momentum moving forward. Given how unstable industry-wide trends have become in comparison to past patterns and the present uncertainty surrounding future demand, planning ahead is now more of an educated guess than anything else. With this disclaimer, however, FreightWaves predicted an impending drop in demand if the typical slowdown for this time of year still occurs.
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