This week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers)
Last week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers)
Three-month FreightWaves Supply Chain Pricing Power Index Outlook: 35 (Shippers)
The FreightWaves Supply Chain Pricing Power Index uses the analytics and data in FreightWaves SONAR to analyze the market and estimate the negotiating power for rates between shippers and carriers.
This week’s Pricing Power Index is based on the following indicators:
Volumes inching higher
Freight demand has been fairly stable after a challenging start to August. Volumes in August traditionally start the month soft before building into the Labor Day weekend. The challenge to freight volumes is the growth is being driven solely by loads moving less than 100 miles, which are up over 20% through the past year. With import levels being at historic levels, eventually the freight that is moving into warehouses will flow inland. The question is: When does that start to happen, and does it move via truckload or intermodal?
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The Outbound Tender Volume Index, a measure of national freight demand that tracks shippers’ requests for trucking capacity, is 0.27% higher week over week, as the market recovers from the sluggish start. The gap with year-ago levels narrowed over the past week as volumes rebounded during this week last year. Volumes are currently 1.48% higher year over year.
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Contract Load Accepted Volume (CLAV) is an index that measures accepted load volumes moving under contracted agreements. In short, it is similar to OTVI but without the rejected tenders. Looking at accepted tender volumes, we see an increase of 0.27% w/w, matching OTVI’s increase and a slight slowdown from the previous week. Accepted tender volumes are up 0.92% y/y.
A week after Walmart reported strong earnings, Target reported a strong quarter with comparable sales up 3% in the company’s second quarter. The company did urge some caution moving forward. “Our view of the consumer remains largely the same; the range of possibilities and the macroeconomic backdrop in consumer data and in our business remains unusually high,” Michael Fiddelke, Target’s chief commercial officer, said in a call with reporters.
Card spending, according to Bank of America’s most recent card spending report, slowed again. For the week ending Aug. 10, total card spending fell 1% year over year. General merchandise spending and online retail spending were two areas that saw increases y/y, rising 1.7% and 1.6%, respectively.
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With the small increase in tender volumes the past week, just over half of the markets within SONAR reported weekly increases in tender volumes.
Many of the largest increases were in markets that are relatively small in terms of freight, but Memphis, Tennessee, the 16th-largest market by outbound volume, did see a fairly healthy increase. Tender volumes in the Memphis market grew by 9.83% week over week.
A market that gets a lot of attention (and rightly so) that has lagged behind the other large freight hubs has been Joliet, Illinois. This week, the Chicago suburb market saw volumes grow by 8.07% w/w.
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By mode: The dry van market has been extremely stable the past week as volumes have largely been unchanged. The Van Outbound Tender Volume Index fell by just 0.09% week over week. Van volumes are 1.28% higher than they were this time last year.
The reefer market remains far more volatile than the dry van market, but the past week has been a positive one. The Reefer Outbound Tender Volume Index increased by 0.45% w/w. Even with the positive week, reefer volumes are down 1.57% y/y.
Rejection rates stable over the past week
Tender rejection rates have continued to trend sideways throughout August, but the concern moving forward is that there has been limited reaction ahead of Labor Day weekend. If tender rejection rates were to move meaningfully higher, where tender rejection rates approach (or eclipse) Fourth of July holiday levels, it would signal that the capacity situation is far more fragile than current market conditions show.
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Over the past week, the Outbound Tender Reject Index (OTRI), which measures relative capacity in the market, was unchanged, at 4.41%. Tender rejection rates were moving higher at this point last year, but even so, the OTRI is up 53 bps y/y. Rejection rates are 15 bps higher than they were at this time in 2019.
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The map above shows the Outbound Tender Reject Index — Weekly Change for the 135 markets across the country. Markets shaded in blue are those where tender rejection rates have increased over the past week, while those in red have seen rejection rates decline. The bolder the color, the more significant the change.
Of the 135 markets, 76 reported higher rejection rates over the past week, an increase from 69 in last week’s report.
The cross-border market of El Paso, Texas, saw the largest increase in rejection rates over the past week, rising 819 basis points, 400 basis points greater than the second-largest increase.
Many of the largest markets in the country didn’t experience significant changes to rejection rates in the past week, but Harrisburg, Pennsylvania, was one of the bright spots. Tender rejection rates in Harrisburg rose by 116 bps, but they remain below the national average at 3.67%. The positive sign in this market is rejection rates are over 120 basis points higher than the second-quarter average.
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By mode: Like the overall market, dry van rejection rates were stable throughout the past week. The Van Outbound Tender Reject Index rose by just 1 basis point, to 4.29%. The dry van rejection rate is 62 basis points above where it was this time last year.
The reefer market has been volatile, but tender rejection rates have been climbing out of the hole created earlier this year. The Reefer Outbound Tender Reject Index fell by 58 bps over the past week to 8.43%. Even with the weekly decline, reefer tender rejection rates are 150 bps higher than they were this time last year.
A positive sign for the flatbed market was Jerome Powell, chairman of the Federal Reserve, stating that “the time has come for policy to adjust” at the Federal Reserve’s retreat in Jackson Hole, Wyoming, on Friday. This indicates that lower interest rates are on the way. For the industrial side of the economy that has suffered for over two years, that would be a welcome sight. This will likely mean increased projects as manufacturers put dry powder to work, though it is unclear how fast it will be deployed. Meanwhile, the Flatbed Outbound Tender Reject Index did increase over the past week, rising by 145 bps to 6.87%. Flatbed tender rejection rates are 100 basis points higher than they were this time last year.
Spot rates continue to retreat from Fourth of July high
Spot rates have retreated off the recent highs, moving lower in August, but that is fairly normal for August. If there is a movement in rejection rates this week ahead of Labor Day weekend, there will also likely be some upward pressure on spot rates. The problem is that spot rates haven’t started rising just a week out from the holiday weekend.
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This week, the National Truckload Index — which includes fuel surcharge and various accessorials — fell by 2 cents per mile from the week prior at $2.27 per mile. Compared to this time last year, the NTI is up 3 cents per mile (1.3%). The linehaul variant of the NTI (NTIL) — which excludes fuel surcharges and other accessorials — was down 2 cents per mile this week at $1.69. The NTIL is 12 cents per mile higher than it was at this time last year. The discrepancy in the NTIL and NTI is solely the changes in fuel, which was far more expensive in 2023 than currently. The average diesel truck spot price per gallon is 64 cents per gallon, or 14.6%, lower than it was last year.
Initially reported dry van contract rates remain in a fairly tight range, falling by 3 cents per mile over the past week at $2.28. Throughout 2024, contract rates have been in a tight range, an indication that the extreme cost savings are in the rearview mirror and service is now coming to the forefront. Initially reported contract rates are down 4 cents per mile from this time last year, about a 2% decline.
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The chart above shows the spread between the NTIL and dry van contract rates is trending back to pre-pandemic levels. The spread narrowed slightly the past week as van contract rates suffered a larger decline than spot rates. If the spot rates move higher into the Labor Day holiday, it will create a spread that is comparable to that of the final months of 2019.
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The FreightWaves Trusted Rate Assessment Consortium spot rate from Los Angeles to Dallas fell by 4 cents per mile over the past week to $2.24 per mile.
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From Chicago to Atlanta, the TRAC rate experienced a slight upward move to start August. It rose by 1 cent per mile to $2.44, the highest level since March 18. The spot rate on this lane is still 31 cents per mile below the contract rate.
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