Challenges and Trends in Freight Shipment and Expenditure: Cass Information Systems' August Report
Our articles may contain affiliate linksShipment and freight spend data released by Cass Information Systems on Monday indicated an improvement in August compared to the previous month. However, year-over-year declines showed an acceleration.
Volumes increased by 0.8% when adjusted for seasonal variations compared to July but saw a significant drop of 10.6% year-over-year. This decline was 1.6 percentage points worse than what was recorded in July. It's noteworthy that volumes reported by Cass didn't turn negative until November of the previous year.
In August 2023, the year-over-year (y/y) figures were as follows:
Shipments: -10.6%
Expenditures: -25.0%
TL Linehaul Index: -11.5%
These numbers indicate a challenging situation, with significant declines in both shipments and expenditures.
The current update contrasts with recent statements made by truckload carriers at an investor conference last week. Some carriers expressed optimism about the market becoming more balanced. J.B. Hunt Transport Services, a multimodal transportation provider, mentioned that its customers have adjusted their inventories, and some expect an increase in volumes in the latter half of the year.
It's important to note that part of the substantial year-over-year decline can be attributed to comparisons with the extraordinary conditions of the previous summer when destocking created high demand for freight as retailers cleared out stale inventory, as explained by Tim Denoyer of ACT Research.
Denoyer also highlighted the growth of private fleets, which is putting pressure on volumes for for-hire carriers. The industry has been experiencing a downturn for 20 months, approaching the historical average downturn duration of 21 to 28 months seen in the last three cycles.
Cass' index primarily focuses on truckload freight, which constitutes more than half of total expenditures, with less-than-truckload, rail, and parcel shipments making up the remainder. If typical seasonality holds, Cass' shipments subindex is expected to remain flat sequentially in September but decline by 8% year-over-year.
Freight expenditures, as reported by Cass, increased by 1.8% when seasonally adjusted from July to August. However, they were down significantly by 25% year-over-year. The year-over-year decline has been consistent for the past few months.
The expenditures subindex encompasses the total amount spent on freight, including diesel fuel prices, which were 12% lower year-over-year in August. Taking into account changes in shipments, actual freight rates were likely down by 16% year-over-year but showed a 1% sequential increase when adjusted for seasonality.
The forecast for 2023 projects expenditures to remain down by 18% year-over-year. This comes after two years of substantial increases in the subindex.
The ongoing increase in diesel prices, up by 20% since July, is an additional factor impacting the freight industry.
Cass' truckload linehaul index, excluding fuel surcharges and accessorial charges, saw a sequential decline of 0.5% in August and a year-over-year drop of 11.5%. The magnitude of the year-over-year declines has been gradually reducing since May.
In addition to future consumer spending and trends in the industrial and construction sectors, the capacity of the trucking industry will play a crucial role in determining future rate changes. Some signs of market tightening were noted by Schneider National, including increased driver availability and shifts in the leasing and brokerage segments.
Despite progress in rebalancing, it may take some time for industry capacity to tighten more broadly, especially with the influence of private fleet growth, which could ease in the coming months, according to Tim Denoyer.
The data used in the Cass indexes is derived from freight bills processed by Cass, a provider of payment management solutions, handling approximately $44 billion in freight payables annually on behalf of customers.
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Highlights of the article
Cass Information Systems reported that in August, there was a sequential improvement in shipment and freight spend data, but year-over-year declines accelerated.
Volumes increased by 0.8% compared to July but fell by a significant 10.6% year-over-year, which was worse than the previous month.
Truckload carriers expressed optimism at an investor conference, suggesting a more balanced market, with some expecting volume increases in the second half of the year.
The year-over-year decline was partly attributed to the comparison with the previous summer, marked by high demand due to destocking by retailers.
Private fleet growth was identified as a factor pressuring volumes for for-hire carriers, and the industry had been in a downturn for 20 months.
Cass' index primarily focuses on truckload freight, accounting for over half of total expenditures.
Freight expenditures increased by 1.8% seasonally adjusted from July to August but were down significantly by 25% year-over-year.
Diesel fuel prices, down by 12% year-over-year in August, impacted actual freight rates, which were likely down 16% year-over-year.
The 2023 forecast for expenditures remained unchanged at a decline of 18% year-over-year after two years of significant increases.
Diesel prices had risen by 20% since July.
Cass' truckload linehaul index, excluding fuel surcharges, showed a sequential decline of 0.5% in August and a year-over-year drop of 11.5%.
The capacity of the trucking industry would be a key factor in determining future rate changes, with some indications of market tightening noted.
Data used in Cass indexes is derived from freight bills processed by Cass, handling approximately $44 billion in freight payables annually for customers.
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