Amidst the industry’s uncertain environment, some are optimistic about freight conditions in the latter half of the year.
According to a Bloomberg and Truckstop survey, freight brokers are hopeful that demand could pick up by the end of 2024, with 49% projecting a volume increase in the next three to six months, 31% expecting flat loads and 20% predicting a decline.
“Though freight brokers continued to face challenging demand and rates in the first half of the year, there are some signs that the worst may be over,” said Lee Klaskow, senior freight transportation and logistics analyst at Bloomberg Intelligence. “We believe a return to seasonal demand, higher import levels and inventory restocking will help drive a recovery later this.”
Freight rates could also be on the rise, as a growing number of brokers believe that spot rates have now hit bottom, with 76% of respondents saying that rates would stay flat or increase in the next three to six months – three percentage points higher than the second half of 2023.
Despite an improved outlook over the past six months, Kendra Tucker, CEO at Truckstop, said brokers remain skeptical about their ability to increase gross margins.
The survey showed that about 44% of respondents noted lower gross margins in the first half of 2024 compared to that same time frame in 2023. This is 13% points worse than what brokers indicated in the second half 2023 survey. Brokers are also not optimistic about margins for the rest of the year as 30% expect margins to deteriorate over the next six months – 7% points more than in the second half of 2023.
Jason Miller, associate professor of supply chain management and interim chair of the Department of Supply Chain Management at Michigan State University, noted an equilibrium in the dry van truckload space could be approaching.
“Demand seems to have found a bottom (based on the seasonality adjusted trucking ton-mile index I coauthor), whereas seasonally adjusted employment in truck transportation has moved down,” Miller said. “This said, we still have an environment with plentiful capacity, as can be seen by dry van spot rates remaining almost flat in July from June and tender rejection rates returning to seasonal patterns.”
Hamish Woodrow, head of strategic analytics at Motive, also notes stronger demand for larger carriers in the coming months, based on capacity reduction and demand increases.
“We’ve seen over 58,000 carriers exit the freight market since it went into recession in Q4 2022. As carrier demand has picked up in 2024, this reduction means less ability to support it, which will inevitably drive prices and volumes upward for the carriers that remain.”
In certain pockets of the market, freight demand has risen, Woodrow also pointed out.
“Motive’s Big Box Retail Index saw trucking visits to Top 50 retailer warehouses rise 7.8% in June, with subsections like grocery and superstores seeing visits rise more than 22%,” he said.
Woodrow explained that retailers are moving away from the low-inventory “destocking” patterns from Q4 2022 through 2023, and so long as consumer demand maintains its current pace, it will mean strong demand for freight.
Motive’s data indicates that 2024 will continue to be a strong year, especially in comparison to 2023. Higher freight volumes are driving peak restocking season for retailers to start earlier. Woodrow said they anticipate it will be particularly true for the upcoming holiday season.
“We expect that by August it will surpass peaks seen in 2021,” he said.
Woodrow noted they see the freight market returning to growth at the end of Q3 and see a stronger Q4. “For consumers, this means prices will inevitably rise as retailers need to pass these rising costs along. We expect this to take hold in 2025.”
Miller said the biggest factor that could shape market conditions is what the FOMC does regarding interest rates.
“Assuming a rate cut doesn't happen till September, I expect dry van TL rates to move along a trough with a likely seasonal uptick in Q4,” he explained. “Using the Bureau of Labor Statistics' PPI for general freight trucking, long-distance, truckload [primary services] as the arbiter of rates, June 2024 is currently down 3.6% year-over-year. I expect we will move back towards year-over-year neutrality as we move through 2024.”
Woodrow said that the strength of consumer spending and interest rates could also be the strongest factors to influence market conditions in the coming months.
