Trucking markets: Spot rates slide off YTD highs in soft week overall

National average dry van truckload spot rates fell 5.5% from last week’s year-to-date high of $3.07/mile, while contract and spot volumes softened across the board in major markets (aside from the Los Angeles to Dallas lane), though spot volume trends were considerably stronger on a marketwide basis. We said last week that the trucking market was beginning to flash yellow warning signs. The data this week does not support a change in that view.

The broad weakness seen in spot rates out of LA, Dallas and Atlanta continued and worsened this week.

Relative capacity, as measured by an Outbound Tender Reject Index (OTRI) of 24.82%, is at roughly the same level as last week, which indicates that the softness in tenders (-5.7% w/w) is related to falling volumes and not capacity loosening substantially on a w/w basis. Nonetheless, capacity did ease again by 31 bps w/w and most major markets now have tender rejection levels equivalent to mid-August, the early stages of the trucking rally and well before the peak. Rejections are likely to see a bump over the next week as drivers opt for freight that gets them home.

However, on a brighter note, the most recent card spending data from Bank of America continues to signal that the consumer-driven trucking rally of the past several months appears to be in good shape. Overall spending last week was tracking 5.4% higher y/y while cumulative holiday season spending from Nov. 1 to Dec. 5 is running 19% above last year’s levels. This suggests that the final week or two of peak season should not see a sharp drop-off.

Further, there was good news with regard to the likelihood of an additional forthcoming stimulus package this week, which should allay any major concerns of a double dip in consumer spending as COVID-19 cases and deaths continue to notch new all-time highs nationwide.

We still expect strong import volumes to feed West Coast intermodal networks well into Q1, but we question whether some of the truckload freight will lose its time sensitivity and urgency in January.

Tender rejections and spot rates still have another week or two to accelerate before the holiday, and we still think there’s a good shot that they do. But more important to truckload carriers and freight brokers is the duration and sustainability of the current high-volume, high-rate environment, not simply how “peaky” this year’s peak is.