Truck freight market data highlighted decline in shipment and spending

As speculation swirls about the trucking market’s eventual recovery, the latest data, published Tuesday, serves as a reality check.

The truck freight market continued to wane during the first quarter of the year, the U.S. Bank Freight Payment Index revealed.

Q1 2024 national freight market overviewQ1 2024 national freight market overviewU.S. Bank

It showed a decline from both the final quarter of 2023 and a year earlier. Spending by shippers dipped by almost 28% from Q1 of 2023, and around 17% from Q4 of 2023. Shipments were also down by more than 21% year-over-year for the quarter.

Though there was hope for a freight market turnaround at the beginning of the year, data showed challenges continued, said Bobby Holland, director of freight business analytics, U.S. Bank. “Nationally, this was the eighth straight quarter of year-over-year volume decreases and the fifth straight with a drop in spending.”

“Spending fell disproportionately to the drop in volume, which suggests downward rates pressure to start the year,” said Bob Castello, senior vice president and chief economist at the American Trucking Associations.

He added that freight shipping capacity continued to outpace available freight volume. “The degree to which this mismatch shrinks or expands will be important to watch throughout the year.”

This also aligns with ATA’s recent truck tonnage data. After a 4% increase in February, the seasonally adjusted For-Hire Truck Tonnage Index declined 2% in March.

ATA's Tonnage IndexATA’s Tonnage IndexAmerican Trucking Associations

The March tonnage data indicated that truck freight volumes continue to underwhelm, signaling that the truck freight recession continued through the first quarter, said ATA Chief Economist Bob Costello.

“In the first three months of 2024, ATA’s tonnage index contracted 0.8% from the previous quarter and declined 2.4% from a year earlier, highlighting ongoing challenges the industry is navigating,” Castello said.

[Related: Truck tonnage ticked down in March]

The U.S. Bank Freight Payment Index showed regional data and widespread impact of various factors affecting the truck freight market. Except for the Southwest, which saw a quarterly increase in volume, all other regions experienced significant declines in shipments and spending.

Overcapacity, bad weather and less consumer spending impacted the truck freight market in the West, resulting to a 23% drop in shipments year-over-year.  

Although the Southwest saw higher volumes, weaker factory output resulted to shipments decreasing to 12.8%, while a slowdown in auto sales and softer manufacturing activity led to an 18.5% drop in shipments in the Midwest.

The most severe contraction was in the Northeast, where spending dropped 34.8% year-over-year and shipments fell 33.9% due to winter storms and soft retail sales.

Fleets, in their first quarterly earnings reports, echoed similar challenges, with carriers focusing on cost reduction, opportunities to gain efficiency and market positioning. 

Several fleets, including Knight-Swift Transportation, Covenant and Heartland Express, noted that significant weather complications created incremental costs and operational challenges.

The excess of capacity has also led to “shippers continued success in leveraging an overcapacity market to their advantage to attain rates at or below cost,” said P.A.M. Transportation Services President Joe Vitiritto in its earnings report.

Heartland Express reported a net loss of $15.1 million for the first quarter of the year, according to an earnings announcement on April 23. CEO Mike Gerdin said that the results “reflect the combination of an extended and significant period of weak freight demand, driven by excess capacity in the industry, unfavorable weather early in the quarter, and ongoing operating cost inflation.” 

Some trucking carriers, such as Knight-Swift Transportation, are against lowering rates further.

In an earnings call, Brad Stewart, senior vice president of investor relations and treasurer at Knight-Swift, said, “The early part of the bid season led to greater than expected pressure on freight rates as some shippers are still trying to push rates down further. In some cases, we have lost contractual volumes because we were not willing to commit to further conessions on what we view as unsustainable contractual rates.”

Marten Transport, which hasn’t reduced rates since last August, said in its first quarter earnings report that it is focused on “fair compensation for our premium services, across each of our business operations, for what comes next in the freight cycle as the market necessarily recovers from its current recessionary late stages.”

Some carrier execs remain hopeful and focused on long-term strategy, noting that the downturn is part of a freight cycle.

“There will come a time when pricing and volume will return,” J.B. Hunt Intermodal President Darren Field, said in an earnings call.

Adam Satterfield, CFO at Old Dominion Freight Line, pointed out, “We just need a little bit more improvement in the underlying freight demand environment to capitalize on it and certainly feel like we’re closer to that event changing and that inflection point, and there have been some green shoots that if you’re looking at things from a glass half full kind of standpoint.”

In an earnings call, Knight Swift CEO Adam Miller, said, “We have to remain disciplined through good times and bad times to ensure that we always keep that cost advantage over our peers in the industry.”