The depressed freight sector is nearing its turning point as the cyclical market “rebalances” in preparation for a rebound of business conditions in coming months, according to the transportation industry analyst firm ACT Research.
That conclusion is based on May statistics covering freight volumes, rates, and supply-demand balances covered in the latest release of ACT’s For-Hire Trucking Index.
“While demand remains soft, less destocking may be starting to add to freight available to haul. Although volumes remain in a slight contraction, this large improvement in our fleet survey suggests we’re in the later stages of the freight downturn,” Tim Denoyer, vice president & senior analyst at ACT Research, said in a release.
ACT said that its Trucking Volume Index jumped in May to 49.4 (SA) from 37.7 in April, as destocking began to slow. The index shows contracting market conditions when it is below 50, and growing markets when it’s above 50.
One reason for the volume growth is that destocking likely peaked recently, with March container imports down 30% y/y, versus April’s decrease of 20% y/y and signs of further improvement in May.
Independent economic statistics from the American Trucking Associations (ATA) reached a similar conclusion, as the group’s advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index rose 2.4% in May after decreasing 1.7% in April. In May, the index equaled 115.4 (2015=100) compared with 112.7 in April.
“Tonnage had a nice gain in May, but remains in recession territory,” ATA Chief Economist Bob Costello said in a release. “The 2.4% gain didn’t erase the 4.5% total drop the previous two months. Additionally, tonnage continues to contract from year earlier levels as retail sales remain soft, manufacturing production continues to fall from a year ago, and housing starts contract from 2022 levels.”
ACT also tracked the slowing slump through several other measures, such as its Pricing Index which continued to contract but rose 5.1 points to 38.3 in May (SA) from a near-record low of 33.2 in April.
Likewise, ACT’s Capacity Index ticked down by 2.6 points m/m to 50.6 in April; still growing, albeit just. After 18 months of growth, capacity is quickly slowing, and some fleets are selling off older tractors or pausing hiring to manage capacity in the softer freight environment.
“Rates are beginning to stabilize, as marginal capacity continues to exit amid brutal conditions. Fleets are freezing hiring and selling equipment to manage utilization in this soft freight environment. Slowing capacity coupled with stabilizing volumes suggest, rates are likely near bottom, and the market is near balance, for now,” Denoyer said.
And the Supply-Demand Balance showed a major rebalancing in May, improving to 48.8 (SA) from 34.6 in April. “The large m/m increase in volumes was the primary factor, and the decrease in capacity also added to the more balanced, but still slightly loose, reading. May marked the fifteenth consecutive underwater point in the series, but May’s reading shows a cycle nearing a turning point,” he said.