The shipments component of the Cass Freight Index® fell 2.2% m/m in July and fell 1.2% m/m in SA terms.
In seasonally adjusted (SA) terms, the index is now 13% below the December 2021 cycle peak, slightly greater than the peak-to-trough declines in two of the three downcycles in the past dozen years.
With normal seasonality, this index would increase slightly m/m in August but decline about 11% y/y, comparing to the extraordinary time last summer when destocking was actually creating freight demand as retailers were shipping out stale inventory. Even adjusting for the strange comparison, this will probably overstate the pressure on national freight volumes because the for-hire market is losing share to private fleets, as discussed below.
See the Methodology for the Cass Freight Index
The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, fell 2.8% m/m and 24.4% y/y in July.
With shipments down 2.2% m/m in July, we infer rates were down 0.6% m/m (see our inferred rates data series below).
This index includes changes in fuel, modal mix, intramodal mix, and accessorial charges, so is a bit more volatile than the cleaner Cass Truckload Linehaul Index®.
The expenditures component of the Cass Freight Index rose 23% in 2022, after a record 38% increase in 2021, but is set to decline about 18% in 2023, assuming normal seasonal patterns from here. Both freight volume and rates remain under pressure at this point in the cycle, but fuel price increases could limit the savings for shippers.
The rates embedded in the two components of the Cass Freight Index declined 17% y/y in July, after falling 21% in June.
Cass Inferred Freight Rates are a simple calculation of the Cass Freight Index data—expenditures divided by shipments—producing a data set that explains the overall movement in cost per shipment. The data set is diversified among all modes, with truckload (TL) representing more than half of the dollars, followed by less-than-truckload (LTL), rail, parcel, and so on.
The Cass Truckload Linehaul Index, which—as its name implies—measures changes in linehaul rates only, fell 0.2% m/m in July to 142.0, after a 0.4% m/m decline in June.
See the Methodology for the Cass Truckload Linehaul Index
We’ve been citing the key factors behind the freight downturn—substitution and inventory—for well over a year, but it’s not all macro factors.
One key and likely underappreciated industry-specific factor is the rapid growth of private fleets. The publicly traded for-hire truckload fleets reduced their collective tractor count by 3% in 1H’23 (see table) and operating authority revocations remain elevated, so for-hire capacity is contracting quickly. But Class 8 tractor production is still at maximum levels, growing the overall fleet, and consequently keeping downward pressure on spot rates.
Private fleets represent over half of Class 8 tractor capacity, and we believe their growth is pulling freight out of the for-hire market, prolonging the industry downturn.
Though significant progress has been made in rebalancing, we think it’s unlikely that industry capacity will broadly tighten until pressure from private fleet growth eases, which looks unlikely this year. Though the freight market is still near the bottom of the cycle, the first step in getting out of a hole is to stop digging. New truck orders in the next few months will be very interesting and, in our view, will be pivotal to setting the market tone for 2024.
The capacity contraction in the for-hire sector is coiling the proverbial spring for better market conditions, but this outlook could be spoiled if the private fleet segment continues its massive fleet expansion.
If you need to understand the future direction of freight markets, the ACT Research Freight Forecast provides in-depth analysis and forecasts for a broad range of U.S. freight measures, including the Cass Freight Index, Cass Truckload Linehaul Index, and DAT spot and contract rates by trailer type, LTL and intermodal price indexes. This service provides monthly, quarterly, and annual predictions for the TL, LTL, and intermodal markets over a two- to three-year time horizon, including capacity, volumes, and rates. The Freight Forecast is released monthly in conjunction with this report.
How have their forecasts performed? For 2022, ACT’s forecasts for the shipments component of the Cass Freight Index were 97.5% accurate on average for the 24-month forecast period. Our January 2021 forecast, two full years out, was 99.8% accurate.
(As a reminder, ACT Research’s Tim Denoyer writes this report.)
ACT Research’s full-year 2022 DAT spot rate forecasts were 99.7% accurate from Q2’21 (19-21 months out) for dry van and 98.5% for reefer. DAT dry van spot rates, net fuel, finished 2022 at $2.06 per mile, in line with our forecasts to the penny from 18 and 19 months out (June and July 2021).
Release date: We strive to release our indexes on the 13th of each month. When this falls on a Friday or weekend, our goal is to publish on the next business day.
