The highlights from Thursday’s SONAR reports. For more information on SONAR — the fastest freight-forecasting platform in the industry — or to request a demo, click here. Also, be sure to check out the latest SONAR update, TRAC — the freshest spot rate data in the industry.
Monthly market update: Economic outlook for 2022
The consumer pushed forward another year.
Unwavering demand kept supply chains strained throughout 2021. There are a few measures to watch closely in 2022 to anticipate consumer demand and trends.
Stimulus packages boosted the momentum for consumer demand many quarters ago, but those are now over and substantial tapering will go into effect at the federal level in 2022. The personal savings rate hit a high of 26.6% in March, but is now back down to 7.3%, the pre-pandemic level. Wages have also increased at an impressive rate, but inflation is canceling that increase out for many Americans.
Inflationary pressures have made their way from electronics to more essential goods like groceries and gas prices. The inflationary pressure will make its way well into 2022 and will be a variable that will ease consumer demand.
Credit card utilization is another factor to take into account in 2022. Revolving consumer credit is still well below pre-pandemic levels; in fact, they are at levels not seen since early 2018. However, revolving credit is climbing and will likely start to be a factor by the latter half of 2022 if the rise continues at this pace.
Non-revolving consumer credit, on the other hand, is accelerating and at all-time highs with increased prices for housing and used cars. Also, student loan payments will restart in early 2022.
These increases, along with the increasing popularity of buy-now/pay later programs will factor into consumers’ ability to spend by the end of 2022.
Consumer confidence surveys reflect the uncertainty of many Americans about the economic outlook. However, that sentiment has not made its way to actions just yet.
The quit rate is still elevated, at 2.8% compared to last month’s release. Voluntary separations are typically seen as an act of confidence from a consumer standpoint.
The massive backlog within the supply chain and containers waiting at the ports will continue to keep volumes elevated in the coming months and those goods that will circulate throughout the economy may generate some significant discounts for consumers as pricey warehousing space fills up and inventory needs to move.
This outlook originally appeared in the SONAR Monthly Market Update. To download the complete edition, click here.
Lane to watch: Lakeland (Fla.) to Savannah (Ga.)
Overview: Limited capacity and volatile rates lead to higher tender rejections and record spot rates. Expect holiday capacity disruption due to many drivers taking time off for the holidays.
Highlights:
- Capacity remains tight in the Lakeland market due to elevated rejections and capacity leaving the market as drivers take time-off for the Christmas holiday.
- Spot rates from Lakeland to Savannah increased 24% from the beginning of December (from $2.25 per mile to $2.79 per mile).
- Outbound tender rejections peaked at 20.91%, an increase of 26.7% from early December levels of 16.50%.
What does this mean for you?
Brokers: Communicate capacity constraints early and often with customers if contracted lanes are uncovered. Quote aggressively on spot rates and leave a margin buffer due to increased carrier buying power. The Port of Savannah shows increased volumes, so there is an opportunity to improve margins if your carrier network prioritizes backhauls out of Florida.
Carriers: A lack of drivers due to the Christmas holiday will be a key factor in taking advantage of the high spot market rates. Larger carriers will need to balance tender compliance with key customers to make room for spot quote opportunities.
Shippers: Focus on carrier and broker tender compliance for contracted lanes. Expect delays due to limited capacity and higher rates if resorting to last-minute spot market postings. Ensure inbound and outbound transportation departments adjust inventory needs to account for the disruptions around the holidays; otherwise premium prices will be paid to move inventory at the last minute.
Watch: America on wheels holiday special
Lane to watch: Atlanta to Jacksonville (Fla.)
Overview: Capacity tightens in both markets as outbound volumes from JAX make the market more attractive.
Highlights:
- Capacity out of the Atlanta market continues to tighten as rejection rates have increased by 74 basis points (bps) week-over-week (w/w).
- In Jacksonville, rejection rates jumped from 23.39% to 27.54% over the past week, while outbound volumes increased by 11.64% w/w.
- FreightWaves TRAC spot rates have stabilized around the $4.60/mi level, but as capacity tightens in both markets, expect upward pressure on rates.
What does this mean for you?
Brokers: Pad margins on the Atlanta to Jacksonville lane. Capacity will be hard to source due to the holiday, but spot rates are off the recent high of $4.83/mi. Try to keep rates around $4.60/mi on this lane, especially because Jacksonville has become more attractive for carriers in recent weeks.
Carriers: As capacity has tightened in Jacksonville and tender volumes have increased, the result is upward pressure on rates out of the market. Accepting a lower rate from Atlanta to Jacksonville could pay dividends on the backhaul move out of Jacksonville.
Shippers: Be wary of disruptions to carrier networks over the next two weeks. The holidays traditionally pull drivers off the road, which starves capacity across the country. Push lead times out further in advance to secure the necessary capacity and don’t be surprised to see higher rates to close out the year.
Lane to watch: Harrisburg (Pa.) to Atlanta
Overview: Rejections are likely to rise as outbound volumes are close to reaching a record high for 2021.
Highlights:
- Harrisburg outbound tender volumes are up 3% w/w, signaling that demand for capacity is increasing.
- The Headhaul Index in Harrisburg is up 25% w/w, signaling that capacity is likely to tighten.
- Harrisburg outbound tender rejections are only up 66 bps w/w, but expect them to increase due to the growing imbalance between inbound and outbound volumes.
What does this mean for you?
Brokers: You are likely to see capacity tighten significantly through the remainder of the week. Outbound tender rejections are only up 3% w/w , but the increase of 25% w/w in the Headhaul Index is signaling that there are fewer trucks hauling freight into Harrisburg, so any further increases in outbound volumes (highly likely) will put even greater pressure on capacity and spot rates.
Carriers: Harrisburg’s pricing power will be shifting even further into your favor for the remainder of the week. If you have capacity in that market, you should increase your rates ahead of the holiday weekend. Most brokers and shippers are likely already feeling capacity tighten, so stay firm on your rates and capitalize on your spot market opportunities.
Shippers: Your shipper cohorts in Harrisburg are averaging 3.3 days in tender lead times, but if the Headhaul Index continues to increase, you will need to adjust your tender lead times to between 3.5 and 4 days to ensure that you are able to source capacity effectively during these tightening conditions. At the end of November lead times spiked to just under 4 days, so that should be a good benchmark to shoot for and help offset tightening conditions.