Demand Planning
11/03/23
The US trucking industry experienced the late-cycle phase of the classic truckload cycle in 2022, leading us into the bottoming phase in early 2023. In October 2023, the rebalancing process continues slowly, though significant progress has been made.
How confident should your business be in ACT's forecasting for 2023?
For 2022, ACT's forecasts for the shipments component of the Cass Freight Index® were 97.5% accurate on average for the 24-month forecast period. Our January 2021 forecast, two full years out, was 99.8% accurate.
ACT Research’s full-year 2022 DAT spot rate forecasts were 99.7% accurate from Q2’21 (19-21 months out) for dry van and 98.5% for reefer. DAT dry van spot rates, net fuel, finished 2022 at $2.06 per mile, in line with our forecasts to the penny from 18 and 19 months out (June and July 2021).
Trucking Industry Trends
For-Hire Survey Suggests a Gradually Improving Freight Market
- ACT's Volume Index fell 4.9 points in September to 49.5 seasonally adjusted (SA), from 54.4 in August. While retrenched from the one-off surge last month, this month’s reading still shows a gradually improving volume trend.
- The Pricing Index jumped meaningfully in September, up 9.2 points to 48.5 (SA), as rates continue to stabilize.
- The Driver Availability Index hit an all-time high in September with a reading of 62. Fleets continue to see a large influx of drivers, unprecedented in our survey’s history. Our survey sample encompasses mainly medium and large for-hire fleets, and it’s clear many of these drivers are coming from the challenged owner-operator market. With still recent scars from pandemic driver shortages, employers across the industry are focused on labor retention—a similar theme across much of the economy.
What Does the Future Hold for the Trucking Industry?
The trucking industry has broadly reached an uncomfortable equilibrium with spot rates steady for several months now. Net fleet exits, which have been going on for a year, are worsening, and although equipment demand at larger fleets remains fairly robust, there are signs that lower new equipment demand will lead to a tighter freight market over the course of 2024.
Even as the freight demand cycle should improve in 2024, the demand outlook remains soft for this winter as the industry continues to add equipment capacity into an oversupplied market. Class 8 orders over the next few months will be pivotal in setting the tone for capacity and rates in 2024.
What is the trucking demand forecast?
After a long downturn, freight demand fundamentals are improving as pandemic substitution effects fade and disinflation takes hold, improving real incomes. Interest rate-sensitive sectors, including housing and manufacturing, face a cautious outlook, but the labor market continues to defy expectations of slowdown, even as wage growth slows, easing inflation pressure.
When truckers make money, they buy trucks and trailers. TL spot rates are the best leading indicator of industry contract rates, and thus carrier earnings. The record declines in TL spot rates since early 2022 are cautionary signals for the 2024 outlook for manufacturers, but the bottoming process and upside we see for rates next year are constructive for vehicle demand beyond that.
How are trucking rates likely to change in 2024?
With recession averted for now, for-hire volume growth should return as overall fleet growth fades, likely in Q2’24. Spot truckload (TL) rates will likely move up this holiday season, perhaps more than seasonally normal, like last year, as capacity has become less price sensitive around the holidays. But even as freight will likely rebound next year, it is unlikely to be enough to tighten the market in the seasonally soft winter months, allowing the shipper’s market to persist.
We expect freight rates to be pressured by these dynamics well into 2024.
For more details on the trucking industry forecast for 2023, see ACT's freight & transportation forecast.
