According to a report in Freightwaves, The Bank of America believes that trucking demand is “near freight recession levels,” According to the report, shippers’ outlook on rates, capacity and inventory levels are matching attitudes not seen since May and June of 2020, when pandemic lockdowns sent freight volumes into a historic decline.
In a Friday note to investors, Ken Hoexter, the managing director of Bank of America’s trucking research, wrote that shippers’ view of demand is down 23% year-over-year. The proprietary Truckload Demand Indicator hit 58 — the lowest since June 2020.
Hoexter said the shippers’ view of rates have “melt(ed) down,” hitting a low not seen since May 2020. Bank of America’s survey represented views from 44 shippers in industries including retail, consumer goods and manufacturing.
Meanwhile, these shippers are finding it easy to find capacity to move their loads; outlook on capacity hit its highest level since June 2020. They also noted their view on inventory levels had climbed to its highest point since May 2020. DAT has reported that the ratio of loads to trucks is down from 4.7% in March to 3.3% in April, another sign that things may just be slowing down for the trucking sector. We have been monitoring the situation to see if the pendulum is actually swinging from the carriers’ side to the shippers’ side. However, we are not yet sure these latest events are truly indicative of a complete swing in the shippers’ favor but do believe we are headed in that direction.
A few anecdotal examples from the Bank of America survey illustrate that data. One food shipper said it was receiving more cold calls from freight brokers rather than those brokers having to seek capacity for shipments on their own. A shipper moving home-building products said flatbed capacity is loosening slightly, though is still tight. And a representative of a forest products company said rates were beginning to soften as truck capacity opened up.
Other indicators are pointing to freight recession
FreightWaves has previously reported that a “sharp, painful downturn” in the U.S. trucking market is coming. The Friday note to investors is the latest indicator of the trucking bloodbath that many in the industry are spotting.
“The way the rates are, you have to run twice as hard to make ends meet,” Dan Guzman, a San Antonio-based fleet owner, recently told FreightWaves.
One key indicator is the FreightWaves SONAR Outbound Tender Reject Index (SONAR: OTRI.USA) . At this time last year, truckers were rejecting a whopping 25.76% of loads they had previously arranged through contract. That indicated they were able to find better loads through the spot market, where shipments are available on demand.
Now that spot market rates have declined, more drivers are moving their contracted loads. As of Sunday, the rejection rate had sunk to 9.92%.
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