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.
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