Volumes remain high in the freight market but will it continue? FreightWaves CEO Craig Fuller caught up with associate editor JP Hampstead to recap the week in freight.
“It’s a normal year,” Fuller said. “If you look at the actual slope of the chart, it looks like 2016 rather than 2017 or 2018.”
Considering the U.S. was entering a freight recession at this time last year, according to Hampstead, a moderate increase in volume is definitely a good sign, but it is nothing to get excited about.
“They’re up 6.1% year-over-year still. Now the thing to keep in mind is last October is really when volumes fell apart. That’s what sparked this 10-month long freight recession that we talked about. The year-over-year number kind of makes the volume story seem better than it really is; they’re kind of stagnated,” Hampstead said.
“I’m hearing from some of the larger asset carriers that volumes are certainly up; a normal season as they would describe it. Everybody still compares it to last year, but there’s no point in doing that because 2018 is written off as an exceptional year,” Fuller said.
However, Hampstead notes that the demand side hasn’t helped move rates. This freight market saw a volume shortage this summer. With manufacturing going into contractionary territory recently, many companies predict lower production levels going forward. There is a reason to be optimistic, though. While manufacturing may be sinking freight, the American consumer might keep it afloat.
“We all expect retail performance to be pretty strong. In the economic cycle, the American consumer is like the last one to really react. It takes a lot for people to spend less money than they did the year before,” said Hampstead.
Americans are no strangers to economic setbacks, however, they’re not strangers to spending either. Hampstead noted that in the past 60 years, American personal consumption has rarely gone negative. Consumers have played a major role in freight because of their never-ceasing desire to spend.
“As long as the employment picture stays strong, the consumer will continue to spend money, and even if the industrial sector goes into a structural decline for some period of time, the consumer may keep parts of the freight economy really strong,” said Fuller.
As we enter October, agriculture can also play a role in increasing capacity and demand in the market.
“Agriculture also has an impact on freight. In the Northwest, the apple market is moving. There’s a lot of demand for pumpkin,” said Fuller. “This is the time of year where you see a lot of ag products move for the holidays. They start to get them into the canneries and production facilities so they can be ready. We’ve seen the Pacific Northwest blow up because of that.”
Hampstead predicts strong rate conditions heading into the fourth quarter. He believes shippers will be looking to lock up capacity as the industry expects rates to increase.
“Seasonality and psychology have at least primed the pump, and as long as people are spending money then I think we will see [rate increases],” said Hampstead.