Everyone is waiting for the downturn in the economy, and subsequently the freight market. Like a kid who knows they are eventually going to get punished for throwing a party while their parents were out of town for the weekend, history has trained us to think that all good things must come to an end with punitive effects.
After a long run of success, it is natural for anyone over age 10 to ask, when is the ball going to drop. Many of us that have been involved in trucking have a tendency to take any single negative indicator as a sign of the beginning of the end for the growth cycle. Eventually, we will be right, but is that happening now? The latest sign we see is volume dropping in the first week of October. Looking closer, you will see this is part of a natural behavioral pattern that we can predict pretty easily with the right data.
At the end of September, the index was at 10105 (anything above 10,000 means that the trucking volumes have increased above their March 1, 2018 number). As of Friday, October 5th, the index was sitting at 9434, a 6% drop from the end of the third quarter.
Over the course of the year there are many seasonal movements and patterns in freight. One of the most regular we can count on is the end of month and end of quarter shipping surge and the subsequent drop in volume at the start of the quarter. Shippers and transportation companies alike make attempts to push as much recognizable revenue into every financial reporting period they can to show as much value as possible. The problem in pushing everything off their dock at once is that they have now handicapped the following period with a deficiency of freight and therefore recognizable revenue, but less obvious is the impact on capacity.
Looking at the outbound tender volume chart for the year we can see this phenomenon illustrated clearly at the beginning of April and October. The drop-off in July is disguised by the fourth of July holiday and peaking summer volume.
There is really nothing wrong with pushing orders out except for the fact they are driving spot market rates up as capacity decreases rapidly. It would make more fiscal sense in the long run for shippers to wait till the first week of the quarter to ship the freight as capacity increases, and there is less risk of having to jump to the spot market. Margins for the quarter will be higher, which investors enjoy far more than general revenue.
About Indices presented in this article
(SONAR: OTVI.USA) Outbound tender volume: USA. The outbound tender volume index provide daily insights on the amount of truckload volume in either specific markets or the entire country, compared to the index date of March 1, 2018. If there are more loads in the market than that date, the index will be above 10,000. A lower number will indicate the market has shrunk. The 10,000 is a base value to the index date. In the above example, SONAR: OTVI.USA is at 9434, meaning that there are 5.64% less loads in the market than on March 1, 2018.
About Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week the Sultan of SONAR will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry- in real time.
The FreightWaves data-science and product teams are releasing new data-sets each week and enhancing the client experience.
