National outbound freight volumes have continued tumbling for the third straight week. Since the peak on March 23, the outbound tender volume index (OTVI) has shaved off 35%. After seeing the pace of decline slow earlier this week, some began to forecast a volume trough. The decline accelerated again Thursday, and now on a weekly basis volumes are down 10.66%.
OTVI was elevated for 44 days when it surged and retreated roughly 25%. In the eight days since reversing all of the freight frenzy, OTVI has fallen an additional 13%. Volumes could continue to fall for some time as economic fundamentals increasingly deteriorate.
The facts of the environment are that more than half of all small businesses are still completely shut down, 94% of Americans are still under shelter-in-place orders and consumers are not spending money. Retail sales data from the U.S. Department of Commerce came in down 8.7% for March — the largest one-month drop in history. This number underrepresents the actual decline in consumer spending due to its lagging nature. Credit and debit card data from JP Morgan suggests consumers are spending much less than 8.7% below this time last year.
Small businesses move a significant amount of freight in the U.S. and until these firms are fully operational again, volumes will stay depressed. When these businesses will get back online is all dependent on how quickly COVID-19 is contained and consumer confidence is reignited.
Just one of the 15 major freight markets FreightWaves tracks was positive on a week-over-week basis. The ratio of positive markets has plummeted compared to recent weeks, and the absolute weekly percentage decreases are accelerating. The market with a gain in OTVI.USA was Fresno, California (2.53%). On the downside, this week saw a decline in Laredo, Texas (-27.83%), Memphis, Tennessee (-21.48%), and Seattle (-18.45%).
Tender rejections plunge again this week
Outbound tender rejections have now fallen to the lowest point in 2020, to 3.93%. Since peaking at 19.25% on March 28, OTRI has plummeted more than 75%. OTRI is a measure of carriers’ willingness to accept loads at contracted rates, and currently, carriers are moving whatever freight they can find. Contract volumes are at Labor Day 2019 levels, and spot rate volumes from Truckstop.com are in the Christmas Day range for most major lanes.
In the three-year history of OTRI, 3.93% is one of its lowest readings. The last time OTRI neared the 4% mark was August 2019, a time categorized by overcapacity. In terms of pricing power, it is constructive to neither shippers nor carriers when volumes are this low. So, to grasp where the power is in this underperforming environment, we must look to precrisis capacity, which was already excessive. Although we believe bankruptcies and company failures will reaccelerate in Q2, capacity is still very loose right now. Until volumes pick back up, or a swath of drivers leave the market, that environment will remain.
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.
Tom
It is shameful what the Brokers are doing right now with rates and the obscene profiteering.
Freight is almost always bid on a Yearly basis , You do not re bid lanes because a pandemic has hit the country for 2 months.
So the excuse when they try and increase their markup right now that ” this is all I have in it” is a lie, they are just trying to increase their profit margin while the can for 2 months or so.
Example: A Large ( top 5 Broker) has a load from TN to a Walmart DC in PA …now we all know that they are not bidding on this load because it is a load they cover multiple times a month, they have this lane. and every day of the week normally they try and cover it for 1400.00 so they perhaps have a rate in with Your normal 15% markup of say 1600-1650.00 with their customer. so now trying to move it for 900.00 is shameful and profiteering.. and the largest Brokers , the ones You interview on this site are the worst culprits.
Dave
Gov needs to cut ALL truck regs and permits etc and get rid of all the legal crap to ease doing business. They could do that in 1 day to take a burden off us all.
Volumes are plummetting out here and rates are worse. No PPP money arrived for most of us and we are going to be on the soup lines soon.
Wall Street got bailed out again. I got a lousy $1200.
Stephen Webster
Many truck drivers in Ontario Canada and Alberta are doing other things and the truck is parked with the $2000 per month plus so much per child. The small trucking companies and owner ops I talked to said help is needed with the cost ( fixed costs like insurance and plates) Many owner ops tell me they wish they had shut down 18 months ago. Better wages and protection for all drivers is needed or the large trucking companies will have to bring in many more offshore truck drivers and mechanics.
Art
Illegals are killing this industry.
Democrats and republicans are Both to blame for ruining this country by allowing illegals to live work depressing wages for all.
At this point it would be best if everyone was made legal so everyone would want the best wages.
But if course this would cost businesses more money.
Dems and republicans dont want to disappoint special interests.