This week, our proprietary bi-weekly BofA Truckload Demand Indicator for shippers’ 0- to 3-month freight demand outlook fell further, to 58.0, down from 64.1 last issue, the fourth consecutive decline, and the lowest level since June 2020. Prior to last survey (Apr 7), the Demand Indicator had volleyed between 66-75 for 20 consecutive surveys (Jul ‘21-Mar ‘21). The Indicator has been flat to down in 17 of the last 24 surveys, and now moves below its all-time 62 average. The Demand Indicator is down 23% year-year and down 10% sequentially. Rail carloads were down 4% year-year this week, and have been negative in 28 of the past 33 weeks. Respondents noted a softening demand outlook, loosening market, deteriorating rail service, and pricing softness in the market. Shippers’ short-term positive outlooks fell to 39% from 50% last survey, neutral outlooks jumped to 43% from 39%, while negative outlooks were 18% from 11%. For the week of April 21, we surveyed 44 shippers across the US to get current views on freight demand and supply.

Pricing outlook craters, capacity availability keeps rising

The Truck Capacity Indicator was 60.2, rising from 58.7 last survey, as shippers find it easier to secure capacity (hitting its highest level since June 2020). The Rate Indicator, which measures shippers’ views on truck rates, collapsed to 39.8 from 58.7 last survey, its lowest level since May 2020. The Inventory Indicator is at 42.0, up from 38.0 last survey, as inventories continue to replenish. On rates, 16% of shippers expect rates to rise, down from 35% last issue, 48% expect flat pricing, in line with last survey, and 36% expect rates to fall, up from 17% last issue. On capacity, 11% expect capacity to be lower, down from 13% last issue, 57% expect the fleet to remain flat, in line with last issue, and 32% expect capacity to increase, up from 30% last issue.

SHIPPER COMMENTS: A Forest Products shipper noted that demand is softening, there are significant delays in the rail network, pricing uncertainty is growing, truck capacity is opening up, and rates are beginning to soften. A Food shipper just completed its 2022 request for proposal (RFP; or contract bids), and noted numerous carriers have already come back and reduced rates on several lanes prior to implementation. A Paper shipping company is seeing spot rate reductions while contract rates are holding neutral. The same shipper remains concerned if July 4 and/or post China lockdowns will impact the supply/demand balance. A Food shipper noted an increase in cold calls from brokers, indicating the market is beginning to loosen slightly, and rates are coming down slightly. (Shipper comments cont’d on p.4)

Transport network sees congestion return

As we highlighted in our Transport Tracker report, the US network is returning to a state of congestion, led by deteriorating rail service, as shippers move to convert incremental truck volumes to rail given rising fuel prices. This is causing the US network (ports and rails) to convulse under pressure. We still argue that demand is falling slightly, evident by the Demand Indicator above, rising inventories, and falling spot pricing. Investors remain focused on what happens when China re-opens and freight flows in mass quantities. Without a spike in goods demand, we could see a push of freight into a sloppy network.

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Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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