The Outbound Tender Volume Index has normalized after its holiday disruption and now sits at 15,266. OTVI has taken a typical seasonal path downward, falling nearly 11% since Thanksgiving. This is a more pronounced decline than in the previous two years, but volumes are at such an extraordinary level, this is not concerning in our view.
There is a strong pipeline of West Coast imports that should lead to large freight flows in those markets well into Q1 of next year, though retail loads will be less time-sensitive post-Christmas.
While today’s freight market still appears robust, the duration and sustainability of the current high-volume, high-rate environment is more important. Although there are some “warning signs flashing yellow,” according to the Passport Research Team, our thesis is largely the same: relatively tight capacity, strong volumes and positive cyclicality. The low inventory-to-sales ratio, strong consumer sentiment and spending, lack of service-based spending options and acceleration of e-commerce growth all bolster this belief.
On a positive note, 11 of the 15 major freight markets that we monitor as a broad, representative benchmark were positive on a week-over-week basis. The ratio maintained the stronger levels it has become accustomed to in recent months as the freight market rallies. The markets with the largest gains this week in OTVI.USA were Cleveland (19.98%), Houston (14.73%), and Los Angeles (10.97%). The markets with the largest declines this week in OTVI.USA were Miami (-9.03%), Ontario, California (-7.55%), and Fresno, California (-3.65%).
Tender rejections remain elevated
Truckload capacity has become easier to secure over the past two weeks, according to the Outbound Tender Reject Index and our conversations with brokers. Since peaking above 28% on Black Friday, OTRI has fallen 11% to 24.94%, its lowest reading since Nov. 1.
Friday breaks a 36-day streak of OTRI holding above 25%. This was by far the longest period above that level since the inception in early 2018. OTRI has remained above 20% for 130 days.
Tender rejections and spot rates still have another two weeks to accelerate before the holiday and there is a high probability that they do. Early next week is when carriers begin to implement widespread bracketing, or the practice of limiting drivers’ range to keep them closer to home.
For more information on the FreightWaves Freight Intel Group, please contact Kevin Hill at khill@freightwaves.com, Seth Holm at sholm@freightwaves.com or Andrew Cox at acox@freightwaves.com.
Check out the newest episode of the Freight Intel Group’s podcast here.