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Monthly Forecast

October is a transitional month for freight and can be very difficult to forecast. It is the beginning of the fourth quarter and the onset of fall in many parts of the country. Retail shipments tend to dominate the landscape of the freight market this month as shippers prepare for the coming holiday season. Items like bottled water and produce give way to electronics and clothing. Demand for these goods is very unpredictable, typically resulting in upward rate pressure towards the end of the month due to strict service requirements. 

With demand growing, the market has begun to tighten; spot rates ticked up slightly from August with average national rates increasing about 1.6% or 2.3 cents-per-mile. Last September, the momentum was heading in the opposite direction with average rates falling 0.6% or 1 cent-per-mile. We expect some of this upward momentum to carry into the peak season through October. Expect some early relief with tightening towards the end of the month again.

Monthly Recap

September volumes continued a positive 3-5% year-over-year trend that started in late July. Mounting demand is a good sign but the outperformance’s longevity is even better as the early part of the year has been plagued by geopolitical issues and recession fears. More shippers moving goods, however, does raise the odds that capacity will tighten. September did have the first unexpected and unseasonal increase in spot rates in over a year, staying above what now appears to be a bottom in the early spring of 2019. The tightening was not enough to incite panic but will potentially have enough impact on carrier perceptions in the upcoming bid season, which hits from now through the end of the year.

The tightness was not evenly distributed across the country, however, as tender rejection rates surged in areas of the Pacific Northwest and Midwest. Much of the tightening occurred as a result of agricultural activity, especially in the Northwest, where apples and potatoes are entering peak harvest. Some of this will spill into October as carriers abandon contracted freight for much higher paying produce moves.

Business Intelligence Insight

October represents a change in the landscape of the freight markets as retail season picks up. It is also a pivotal time of year for many shippers as they kick off the annual contract freight bid process. Current contract freight rates have declined in 2019 due to the excess of available capacity in the market. The narrative as of late has many experts claiming that capacity has begun to rationalize, which should result in upward pressures on rates heading into 2020. Last month, we suggested that savvy shippers should plan to be more flexible with contract pricing, as it would work in their favor to avoid having to source capacity in the spot market at higher rates if the market turns. This remains true but it is also in shippers’ best interest to validate the carriers and brokers’ ability to provide quality service if they are coming in highly aggressive going into 2020.

Macroeconomics

The unemployment rate continues to remain low, around 3.7% at the end of August, indexing an economic situation that is still favorable for the most part. The economist-favored, more-comprehensive U-6 rate — which includes workers not currently seeking jobs and part-time workers looking for full-time work — took a marginal increase from 7% to 7.2%. This is still considered relatively low, though moving in the wrong direction. Wage growth continues to outpace inflation but has slowed somewhat off June highs.

Targeted Segments

The General Motors strike that began on September 16th, involving 48,000 members of the United Auto Workers union (UAW), had a short-term, immediate impact on freight movements around the Midwest. Shipments of parts into the facilities halted while negotiations were being held. The strike will have a very negative impact on most carriers hauling commodities specific to the automotive sector. Short-term, when production capacity comes back online, expedited carriers should benefit. The long-run concern will be over more contraction in the carrier market as there will be further deterioration of revenue while the manufacturer is on hiatus. Automotive is a specialized sector of the trucking sector so any loss will lead to rising transportation costs of that type of freight as supply contracts.

A Message From Matt

Since the beginning, Arrive Logistics has always focused on raising the standard of what it means to be a modern freight brokerage. Our first priority is always to help you achieve your business goals. That is why I am thrilled to provide our customer base with exclusive market data on a monthly basis.

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Thank you,

Matt Pyatt, Co-Founder & CEO

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