August is a transitional month in the freight market. School starts and vacations wind down as people return to the office. This means shipping volumes tend to, if not increase, at least stop declining. The impact on rates is typically flattening to a slight increase. Labor Day puts upward pressure on rates towards the end of the month as well but that impact varies from year to year. Volumes have already started to recover: year-over-year comps are now showing positive growth for the first time in two months. The supply side is correcting as trucking failures are on the rise after two months of negative growth.
We are still early enough in the cycle for rates to be less sensitive to increasing volumes but shippers with retail exposure should be aware that no market is immune to increasing service requirements like the ones seen around holidays. Recent consumer confidence numbers (at eight-month highs) and personal income growth at 4.9% year-over-year also point to a healthy retail season.
Spot rates are 30% lower than last July but have found a floor in line with 2017 levels over the past few months. This is a sign that we may have found the bottom and any disruption as many smaller carriers exit will have a more significant impact moving forward. August has higher odds of hurricane formation in the Atlantic basin, which can push rates higher quickly. Black swan events excluded, we expect increasing upward pressure on market rates towards month-end as volumes trend higher.