Truckload rates improved in June

Although the waters are clouded by the volatile fuel price environment, it appears that the weak economy has suppressed rate increases with quarterly run rates at zero and y/y increases near 2%. The soft brokerage market has particularly softened spot market rates. However, rates rebounded in June, with year-over-year growth jumping back above 3%, up 3.2%.

After dropping in February, pricing was essentially maintained at that level for four months but improved in June. After dropping 1.5% in February, rates inched up 0.1% in both March and April before dropping 0.4% in May and surging 1.2% in June. Year-over-year improved in June after slowing considerably through May, up 3.2%. This is down significantly from the 5%+ growth that we had seen for the last year prior to February.

The surprise of this recovery was the ability of the industry to sustain increases well above inflation despite the slow growth in freight demand in 2011. That has now slowed but is expected to stabilize and then recover in 2013. After dropping 10.9% in 2009, industry rates (excluding fuel surcharges) rose 4.4% in 2010. The rebound continued in 2011 with growth of 5.8%. Growth is slowing substantially in 2012 but remains positive, and will be up 2.8% for the year. We then get stronger growth in 2013 and 2014. Year-over-year rate growth should get back above the 5% mark by mid-2013. We anticipate seeing growth of 5.2% in 2013 and further acceleration to 8.3% in 2014. The strength in 2013/2014 is due to the inclusion of the HOS rules. That will help move pricing higher until at least mid-2014.

Barring recession or a reversal of regulatory policy, we expect rate increases to begin accelerating in early 2013. For shippers, the increases could be especially dramatic if fuel prices continue to increase.

Reasonable market fundamentals indicate that year-over-year rate increases will move up as they lose the influence of mid-2011 weakness. Strong 2012Q2 profit performance is another good sign, although falling fuel prices were very beneficial.

Note that contract rate increases have been stronger than spot rates. This situation will reverse in 2013 as the market tightens and spot capacity will be more difficult to come by.

Public TL carriers’ rates (as measured by revenue per loaded mile) saw a large increase over Q1, but it was still well below the increases seen over the past couple of years. As such, the year-over-year growth rate slowed to just 2.4%. This is the smallest rate increase since it turned positive in Q2 of 2010. A weak start to the year, and a currently sluggish freight environment, will hold down rate increases until 2013.

Our truckload rates data is based on publicly-available data from security analysts and trade organizations. We then forecast the cost and margin elements, factoring in inflation and industry conditions. The figures are for rate-per-loaded-mile (less fuel surcharge), seasonally adjusted and are indexed to 2003Q1.


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