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Trucking rates climbed again in October as long-distance trucking leads the way

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Data on producer prices shows that overall inflation pressure jumped at the start of the 4th quarter, though core price gains were more modest. Industry detail showed that trucking rates posted another solid gain in October, with big gains in long-distance rates offsetting declines in LTL.

 Core producer price inflation calmed in October
Core producer price inflation calmed in October

The Bureau of Labor Statistics reported that the producer price index (PPI) advanced 0.6% in October, marking the largest monthly gain since 2012. This exceeded consensus expectations of a 0.2% gain, though much of the surprise was driven by the often-volatile trade services components of the PPI. Producer prices excluding food, energy, and trade services, rose just 0.2% during the month and are 2.8% higher than at this point last year.

Market watchers and policymakers typically use the PPI to gain some insight into what the underlying pressures of consumer price inflation are in the economy. In addition, the PPI provides significant detail by both commodity and industry, giving insight into which areas of the economy face the most pricing pressure.

Trucking rates climb, led by gains in long distance trucking

 Freight trucking rate inflation has calmed in recent months
Freight trucking rate inflation has calmed in recent months

Data within the PPI release on trucking rates showed another solid increase in October, rising 0.5% from September’s levels after a 0.5% increase in the previous month. This was enough to push year-over-year rate inflation back above 8% in October after it had fallen from multi-year highs in the past couple of months.

 Long distance LTL rates have tumbled in recent months
Long distance LTL rates have tumbled in recent months

The gain in trucking rates in October was largely driven by big increases in long distance truckload rates, which climbed 1.1% during the month. This was good enough to keep year-over-year rate gains near double digits at 9.5%. LTL rates for long-distance loads fell 1.4% in October, as yearly growth continued to tumble to 4.1%.

Behind the Numbers:

The Federal Reserve has been paying attention to various measures on inflation over the past several months in an attempt to gauge whether faster rate hikes are necessary to stave off accelerating price gains. The Fed held interest rates constant earlier this week and appears set to raise rates in December, but members have repeated stated that they are willing to adjust the pact of rate hikes if the incoming data suggests faster or slower inflation in the economy  The headline PPI gain was certainly large enough to grab some attention, but the details suggest that there aren’t many signs of widespread inflation pressure in the economy.

On the trucking side, the second straight solid monthly gain suggests that conditions are still generally tight in the industry. Year-over-year inflation rates have come down from the record highs seen in the middle of the year, but are still generally strong and far outpacing the pace of inflation in the rest of the economy.

Tougher comps are ahead, as rates in the industry posted big gains in November and December last year. This should lead to a deceleration in growth rates going forward even as rates continue to climb. This is likely to be a theme through the early part of next year, and rate inflation in  freight trucking is expected to settle in the 5-6% range.

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.