The Volume Index increased 7.4 points in October to 56.9, seasonally adjusted (SA), from 49.5 in September. The rebound in volumes m/m may be tied to recent port and hurricane disruptions, but broadly speaking, freight demand trends are gradually improving. The economy continues to exceed expectations, and notably in Q3, durable goods spending rose 8.3% q/q SAAR. Threat of another ILA strike on January 15 has likely caused shippers to pull freight forward, and with tariffs on the horizon following the election, the pull-forward in freight is expected to accelerate further. LA/LB ports loaded imports rose 30% in October. Additionally, after adding considerable capacity the past year, recent data suggest private fleet growth is slowing.
The Pricing Index increased 2.7 points m/m in October to 55.1 (SA), to the highest level in 2.5 years. Increasing volumes and slowing growth in equipment capacity are helping to rebalance the market and provide some relief in rates after two years under water. The likely pull-forward in freight ahead of the potential ILA strike and tariffs in January coupled with slowing private fleet growth are all likely to lead for-hire rates higher in the coming months. At a recent industry conference, shippers’ expectations coalesced around a 2%-4% increase in contract rates in 2025.
While we see modest positive momentum for freight rates in the coming months, the fairly mild downturn in equipment sales suggests a gradual recovery looks likely.
The Capacity Index decreased by 1.1 points m/m to 49.7 in October, from 50.8 in September. While slowing growth from private fleets is helping to ease pressure on for-hire carriers, eight quarters of weak profitability point to capacity additions occurring at replacement levels.
US Class 8 demand is softening, indicating that tractor fleet growth—a key reason this cycle is the longest on record—may soon be coming to an end. However, further declines are needed for capacity to start tightening.
The Driver Availability Index increased to 55.6 in October, from 53.6 in September. October marks the 29th month in row the index has been at or above 50. Driver availability remains persistently elevated and far from a shortage, partly supported by the large increase in pay during the pandemic and by the rise in migration since. Driver availability may fall on the margins as the FMCSA closes a loophole in the Drug & Alcohol Clearinghouse, likely tightening enforcement, but based on our survey results this month, fleets are doubtful it will have much of an impact.
A tightening in the driver market, which could come from the long cyclical lag from lower rates, the baby boomer retirement wave, or mass deportations, would press truckload rates higher.
Fleet purchase intentions rose m/m, with 60% of respondents planning on buying new equipment in the next three months. 60% is slightly above the historical levels for October and likely reflects the slow but increasing confidence in the for-hire market. Improving volumes as private fleet growth is slowing likely helped improve equipment purchasing intentions, but with net margins under pressure for the past two years, equipment demand will likely hold at replacement levels.
The Supply-Demand Balance increased in October to 57.2 (SA), from 48.8 in September, as freight volumes increased and fleet capacity decreased. Private fleet expansion, which is not captured in this indicator, has resulted in a longer period with the market close to balance than in past cycles. Slowing US Class 8 tractor sales in recent months are further rebalancing and moving the cycle forward, albeit slowly. Continued strong US economic growth is leading to improved goods demand and will make its way to the for-hire market as private fleet growth slows.
Disinflation and lower interest rates support the consumer outlook, as rising goods demand and a turning inventory cycle have resulted in improved import volumes. Private fleets are handling an increased share of volumes, which has been the sticking point keeping the for-hire market from turning, but a slowdown in their growth will support an improving for-hire market balance.
Fleet productivity rose 4.9 points m/m to 52.1 (SA) in October on higher volumes and a decrease in capacity. In general, productivity has been challenged by private fleet pressure in the for-hire market but should improve with volume increases and capacity decreases.