Waves of pressure from the pandemic recovery and the holiday peak continued to drive steep jumps in freight costs for retailers and vendors during the third quarter this year, as spending by shippers jumped 5.6% over the previous quarter and 32.6% year-over-year, a new study from U.S. Bank showed.
The rising costs of freight is triggered by increased demand for freight transportation—caused by record container imports at seaports and the holiday inventory stocking push—striking at the same time that the trucking industry faces very tight capacity due to shortages of both drivers and equipment, according to the U.S. Bank Freight Payment Index. That combination has now pushed the company’s spending metric to its highest level in the history of the index.
The bank’s index hit its new highwater mark despite economic headwinds that restricted the growth rate of shipment volumes during the third quarter. Factors pinching shipment volumes included the pandemic Delta variant, extreme weather including Hurricane Ida, and shutdowns at auto manufacturing plants due to computer chip shortages, the bank found. Together, those complications allowed third quarter shipment volumes to grow just 1.5% over second quarter levels and 2.4% year-over-year. Both those figures were lower than the second quarter, when shipments rose 4.4% sequentially and 6.8% year-over-year.
“Our new spending data reflects what we’re hearing on the ground from our clients: there’s high demand for truck freight transportation, but truck capacity is limited by both persistent issues of continued driver shortages and emerging challenges of equipment,” Bobby Holland, U.S. Bank vice president and director of Freight Data Solutions, said in a release. “The industry is working tirelessly to meet the increasing demand, but these challenges will take time to address.”
Those statistics matched up with monthly numbers from the American Trucking Associations (ATA), whose seasonally adjusted (SA) For-Hire Truck Tonnage Index also increased 2.4% in September compared to the same month last year.
The ATA pointed to similar factors affecting the market, contrasting a holiday inventory surge with a shortage of trucks on the road. “The drivers of truck freight, including retail, construction, and manufacturing, plus a surge in imports, are helping keep demand high for trucking services,” ATA Chief Economist Bob Costello said in a release. “It is good that tonnage rose in September, but it is important to note that this is happening because each truck is hauling more, not from an increase in the amount of equipment operated as contract carriers in the for-hire truckload market continue to shrink from the lack of new trucks and drivers.”
The month of October historically provides some relief from the frantic holiday push to stock gifts on retail shelves, but according to another study from Truckstop.com and FTR Transportation Intelligence, that effect is smaller this year than most. As expected, the companies found a drop in shipment volumes in the spot market for the week ending October 15, but they said that drop “was a much smaller decline in volume week over week than is typical for mid-October.”
According to Truckstop.com and FTR, the slight decline is due to continuing supply chain disruptions as carriers struggle to keep up with demand. Looking further into the future, that disruption could possibly grow more acute if a recent White House move to support 24/7 operations at the ports of Los Angeles and Long Beach exerts additional pressure on an intermodal network that is already strained due to rail congestion, the report said.