Chart of the Week: Outbound Tender Volume Index – USA – Seasonality view SONAR: OTVI.USA
The start of any quarter in the transportation world is like the end of a race where the participants are keeled over on the side of the track, gasping for air. This tends to be the case in just about any business where sales quotas and revenue targets are a thing, which is just about all of them. We can see a visual representation of this looking at a chart of Outbound Tender Volume Index (OTVI) for the U.S. over the past week. What is most interesting about this dramatic drop, is the fact it still produced the largest gap between current and previous year’s truckload volumes. It is time to ask what to take away from this seemingly simple stat.
First, the seven-day decline of 5.96% ending on October 7, was the single biggest non-holiday weekly drop in the OTVI of the year. May 16 was the second biggest weekly slide of the year, when volumes plummeted following the implementation of additional tariffs on China. Volumes fell 5.92% that week. The big difference in those two time periods is the fact that one (October) was expected, and the other (May) was an anomaly.
For those that are not familiar with trucking seasonality, May is typically one of the stronger months of the year in terms of freight shipping volumes. Volumes jumped 3.36% from May 10 to May 16 in 2018, starting a bull-run of weekly increases, less Memorial Day, ending on June 26th. Whereas the magnitude may be less in other years, the trend is similar in the way volumes increase through May and June before cresting at the first seasonal peak of the year before July 4th.
2018 Who?
The second takeaway from the recent downward movement of the OTVI is the fact it still produced the biggest positive yearly differentials of 2019 versus 2018 excluding holidays. From October 1 to October 7 freight volumes averaged 6.5% higher than the same time last year. 2018 has been considered one of the most robust freight markets in over a decade, so seeing any large positive gains is seen as a big deal, but is it?
Any positive year-over-year growth is good for the transportation sector and subsequently the economy. October 2018 was the month that put the bull-run of freight to an end, beginning what many consider the start of the recent freight recession, at least for truckload. Having a significant increase over any month, regardless of weakness, should be taken as a good sign.
Regional Impact
All volumes are not created equal. Looking at a further breakdown of the OTVI by region, there is further explanation to where freight patterns are shifting. Surprisingly, the region with the largest YoY increases by percent in volumes is the Northwest, comprising of Washington, Oregon and Idaho.
Perhaps not so surprising, much of the annual increase has arisen from increased activity off the West Coast where heavy amounts of importing has driven domestic shipment counts higher. This does not bode well considering the current blackout situation occurring in California, which could prove to be quite disruptive to any activity transportation or otherwise.
The nation’s largest region in terms of outbound volumes, the Midwest, are actually 3% lower compared to last year. This includes major transportation hubs like Chicago and Columbus, Ohio.
If the trend continues, October will be the third consecutive month of positive YoY comps of U.S. truckload volumes. Spot rates responded to the elevated volumes in September by averaging 1.6% higher than August nationally excluding fuel.
Capacity Unaffeced
FreightWaves proprietary Outbound Tender Rejection Index (OTRI) supports a slight tightening of capacity over the past month, and surprisingly held through the majority of the decline in volumes, but has now started to decline slightly as capacity returns.
Volumes have already started to climb again, entering the middle of the month. The market is still relatively oversupplied and able to tolerate volumes that were higher than peak season in June through much of September.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week a Market Expert will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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