The State of the Trucking Industry: Seven Insights and Trends to Watch

The trucking industry is experiencing major shifts in supply chain strategies, sustainability efforts, and what consumers expect from companies. These shifts are driven by e-commerce, globalization, and other technological advancements.

Ryder’s latest State of the Industry report expounds on this changing landscape, presenting a comprehensive transportation logistics industry analysis that highlights key trends, drivers, and upcoming technologies alongside other trucking industry key insights.

Our goal with this analysis is to equip industry professionals, stakeholders, and decision-makers with the knowledge and tools they need to navigate this change effectively.

In this article, we'll explore some of the following insights and trends:

• Since mid-March, truckload volumes and spot-market rates have remained stable, rejection rates have slowly increased, and new contract rates continue to be repriced lower.
• Intermodal volumes remain higher than last year, and international intermodal volumes are growing faster than domestic.
• The maritime market has recovered from the Lunar New Year and anticipates a positive outlook for the summer. Ocean spot rates continue to trend lower despite relatively healthy volumes.
• Inflation has remained stubbornly persistent, which has lowered expectations that the upcoming Federal Open Market Committee (FOMC) meetings will yield any interest rate cuts. The labor market is a mixed bag despite solid employment metrics.

Let's start by examining freight demand.

Truckload markets remain stable

Freight demand has remained quite stable, maintaining the brisk pace set at the start of the year through the second quarter. This stability has highlighted the market’s stubborn overcapacity.

April has been a solid month for shippers, which may make May comps tough as demand is expected to grow. The end of March was a notable exception to this strength, but Easter tends to see a seasonal slump.

Also, this year’s Outbound Tender Volume Index (OTVI) has consistently been ahead of 2023 so far, suggesting that the worst of the recent freight recession is behind us.

Spot rate increases helped by rising diesel prices

Truckload dry van spot rates have found stable footing and are slowly climbing after coming down from some unseasonal highs in February and early March. Diesel retail prices are also steadily rising, allowing carriers to negotiate higher rates.

The National Truckload Index (NTI)—a seven-day moving average of national dry van spot rates that includes fuel—is up 0.5% year over year (y/y) at $2.23 per mile. Contract rates, which don’t include fuel and other accessorials, have already depreciated following the recent bid cycle that favored shippers. As of early May, these rates have fallen 9.5% y/y to $2.29 per mile.

LTL carriers aim to continue expansion

The year 2024 is on track to be a year of major expansion, with many carriers vying to secure volume as they acquire new terminals. For example, after a national carrier dissolved last year, the remaining titans in the field divided up the facilities it left behind. However, quality remains a high priority, even as these carriers grow quickly amidst fierce competition.

As of early May, the average LTL contract rate is up $0.28 per hundredweight over the previous month. Now sitting at $46.40 per hundredweight, LTL shipping costs 14.3% more than it did a year ago.

Macroeconomic conditions paint a mixed recovery picture

Manufacturers have remained optimistic about an economic recovery, resting on the belief that interest rate cuts are on their way. However, the possibility of these rate cuts seems to be fading, as does that positive attitude.

Rising energy prices are another crack in the recovery narrative. Despite these headwinds, manufacturers should be cautious about raising prices to counteract this trend, as doing so may only reinforce the inflationary pressures that have delayed interest rate cuts.

The industry's attitude about recovery seems to be mixed:

• The Institute for Supply Management (ISM) and S&P Global both report that the manufacturing sector is on the rebound.
• New York isn’t so sure. April’s Empire State Manufacturing Index showed that recovery could take longer, with its forward-looking subindexes falling in March and April.
• On the other hand, Philadelphia showed significant expansion in its manufacturing sector, while Texas reflected more of New York’s pessimism.

In addition, labor market data continued to outperform the most optimistic forecasts in March, with job growth surpassing expectations by nearly 50%.

Maritime rates fall, demand remains stable

The maritime market has been recovering from a shipping crisis in the Red Sea: Houthi rebel attacks on tankers and cargo ships forced hundreds of vessels to steer clear of the Suez Canal, a vital waterway, and instead find an alternate route around southern Africa. This significant detour was 4,000 miles longer, increasing freight costs and transport times.

This recovery is now primarily considered to be complete, and there seems to be relative strength in volumes compared to last year. Ocean and container spot rates have both declined since early February, but U.S. maritime import shipments are tracking above 2023 levels.

Some of the country’s busiest ports are showing signs of growth:

• The Ports of Long Beach and Los Angeles are up double-digits y/y.
• The Port of New York and New Jersey is up 8.1% y/y.

While some other, smaller ports are down:

• The Port of Savannah, Georgia’s imports are down 29% month over month (m/m).
• The Port of Charleston, South Carolina is down 7% y/y.
• Not surprisingly, the Francis Scott Key Bridge collapse in Baltimore has caused a major decline in imports: 96.9% m/m and 97.5% y/y.

This growth at the nation’s largest ports is particularly notable as it directly contradicts the usual trend of ocean volumes falling in the spring and rising in the summer. It’s also worth noting that Ocean TEU Booking Lead Times are 20% shorter than this time last year.

Intermodal rail has healthy volumes, pricing challenges

The intermodal rail market continues to grow at an impressive rate. After recovering from an early April slowdown, volumes are up 0.6% m/m, with total volume growing by 12.9% so far for the year.

Empty volumes are also up 1.1% m/m and 21.3% y/y overall. Domestic volumes are ticking upward more slowly, by 5.1% over the past year, with empty domestic intermodal volumes up 10.8%. Meanwhile, loaded international volumes are up 20.2% over that same period, and empty international volumes are up 31.1%.

Intermodal contract rates rebound but remain lower

On average, domestic intermodal contract rates are staying level with those of the previous year, and capacity remains plentiful. However, the sector is still feeling pressured; despite positive trends, the savings index remains well below the 13.93% historical average.

Most of the 13 densest intermodal lanes across the country are down, with the sole exception of the Chicago-to-El Paso lane, which is enjoying an increase of 0.5% m/m and 29.2% y/y.

Intermodal spot rates dip significantly

Intermodal tender rejections can gauge service disruptions as carriers often operate on “auto-accept” when contract rates are competitive with spot rates.

The current national intermodal rejection rate continues to trend higher, now sitting at 1.03%. As increased volatility hit the market, intermodal rejection rates in Los Angeles jumped to 1.82%.

Other trends of note

Other trends worth keeping an eye on include the following:

• The Federal Reserve was expected to issue at least three interest rate cuts in 2024, but recent labor market data and inflation have quieted those expectations. However, the rosy labor outlook may be deceptive, considering that a sizable portion of hiring has happened in leisure, hospitality, and government. Healthcare and retail also saw growth. Inflation has remained stubbornly persistent and shows no sign of slowing, a further sign that rate cuts are unlikely.
• Manufacturing appeared to rebound in March, despite rising energy prices.
• Home prices are still well above pre-pandemic averages. Housing starts dropped 14.7% in March, the largest monthly drop since April 2020, when COVID lockdowns shook the industry.
• Personal debt is at an all-time high (up $11.3 billion at an annualized rate of 10.2% in February), and personal savings were down 3.6% in February, their lowest level since December 2022.
• The March Logistics Managers’ Index (LMI) release showed the headline index staying in expansionary territory and hitting its fastest expansion rate since September 2022.

Navigating the Evolving Trucking Industry

The trucking industry is at a pivotal juncture, characterized by a blend of stability in freight volumes and significant shifts driven by technological advancements, supply chain innovations, and evolving consumer expectations.

As the freight recession fades into the past, the industry faces a mixed recovery landscape, marked by stable truckload markets, rising diesel prices, and expanding LTL carriers.

Ryder is your source for comprehensive industry reporting and analysis. Our expertise in the field can provide the transportation logistics solution you need.