Trucking rates climb to round out the 3rd quarter, but yearly growth continues to moderate

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Data on producer prices shows that overall inflation pressure continued to stabilize at the end of the 3rd quarter, rising modestly in September.  Rates within trucking posted stronger growth during the month, led by big increases in LTL pricing. These gains weren’t enough to boost yearly inflation, however, as tougher comps have brought down growth rates.

 Core PPI inflation remains elevated

Core PPI inflation remains elevated

The Bureau of Labor Statistics reported that the producer price index (PPI) advanced 0.2% in September after declining in the previous month. This falls in line with consensus expectations, though the headline number was weighed down by large declines in both food and energy prices.  The core PPI, which strips out food, energy, and trade services, rose 0.4% during the month. This marks the largest gain in the core gauge since January of this year, and puts core PPI inflation at 2.9% year over year.

Many have been paying attention to producer price data in recent months in search of signs that recent trade spats and rising commodity prices would begin filtering into the broader economy. However, the details of this morning’s report show little sign of tariff impacts. Much of the gain this month was driven by an increase in service prices, while the prices for goods overall in the economy fell 0.1%. Within the service sector, approximately a third of the increase was driven by a 5.5% surge in the rates for passenger airline services. This jump is likely temporary, and not reflective of the underlying inflation pressures in the economy.  

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Trucking rates climb, led by gains in LTL

Data on trucking rates showed bigger increase in September, as rates rose 0.4% from August’s levels after declining in the previous month. Despite the solid gain during the month, however, year-over-year growth in general freight trucking rates declined to 7.8% after three consecutive months above 8%.

 Y/Y growth in freight trucking rates moderated despite solid gains

Y/Y growth in freight trucking rates moderated despite solid gains

The gain in trucking rates in September was largely driven by big increases in LTL. For long-distance trucking hauls, truckload rates increased 0.2% during the month as year-over-year growth fell to 8.3%. LTL rates for long-distance loads climbed 0.7% in September, though again tough comparisons to last year pushed year-over-year growth down to 6.1%. A similar story was seen for local freight movements, which rose 0.5% in September on the back of a 1.2% surge in local LTL rates.

Behind the Numbers:

The headline PPI numbers again suggest that much of the tariff impact felt by certain industries in the economy has yet to translate into a broader increase in overall prices. The core PPI reading on its face would normally raise some concerns, but since it was largely driven by a single industry, there is no real cause for any tariff trouble alarms to go off.

On the trucking side, the results here are likely indicative of what the industry can start to expect to see more frequently going forward. The first half of the year saw big gains in freight demand and favorable comparisons to the relatively-calm first half of 2017. This led to record high yearly growth rates, particularly on the long-distance side of the industry.

Now, the economy is still growing at a solid pace but it is unlikely to reach the heights of growth seen during the 2nd quarter. At the same time, signs continue to point to an industry that is adding capacity and adjusting to address the capacity crunch. In addition, the comparisons are getting tougher, so even in months where the rate increases are solid as they were in September, yearly rates are likely to continue to decelerate. Rates are still likely to climb within trucking going forward, but not at the same clip that we saw in the earlier months of the year.

Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.