Van rates slipped 2.6% lower last week on the spot freight market. At the same time, financial markets continued to climb toward record heights. What do these conflicting signals mean?
In transportation and logistics, we are primarily focused on the first quarter. Q1 is typically slow, with cold winter temperatures and poor road conditions exerting a "chilling" effect on freight availability. Financial markets have already dialed that into their projections, and they are looking ahead. Not very far ahead, perhaps, but they apparently see better times coming as soon as Q2.
As I discussed in a previous blog post, there continues to be positive news on energy development, housing, unemployment, and manufacturing that should start to have an impact on freight availability. So the open question is when will we begin to see the turnaround, and how strong will it be? Rail traffic is usually an early indicator, as rail transit times are longer than truck transit times. In other words, if you want freight to arrive at its destination on a certain day, you will need more lead time if it is going by rail. Looking at the latest week of rail data, we see a 3.8% increase in carloads and intermodal, combined. We also saw an increase late in the week, in the number of rate confirmations on the spot freight market for trucks. Those two nuggets of data tell me that freight volumes are returning to seasonal norms. I expect spot market rates to stabilize -- or possibly even to rise slightly -- by the end of next week.
On the other hand, I don’t expect any significant rate increase until March. If the positive news continues to boost consumer confidence, we might see an early start to the flatbed season. Construction projects will get approved and implemented as soon as weather conditions permit. Corporations appear eager to grow revenues in 2013, following years of tepid, timid investment. These and other factors add up to strong truckload volumes in the second quarter.
Right now, we still see soft freight volume and rates in California, Florida and East Texas, while South and West Texas are strong for reefer equipment. Other hot pockets are along the upper Mississippi Valley for van; Idaho, eastern Washington, western Montana and most of the Southeast region for flatbed. Reefers are also doing well out of Idaho, Maine and Wisconsin.
What trends do you see in your lanes? Please share your comments below, and return to this blog for more updates on the economy and its impact on freight, trucking and logistics. To do your own forecasting, consult DAT Truckload Rate Index.