If the economy is slowing, someone did not tell the freight market, at least when it comes to volume. The Outbound Tender Volume Index (OTVI.USA), which normally troughs for about a week after a holiday period, has been clawing its way out ahead of schedule and hit 9,808 yesterday – it averaged 9,580 from December 1st to the 24th, 2.3 percent lower than its present value.
The increase may not seem like much, but January is considered one of the slowest months of the year for freight and many other industries. With so much talk about a slowing economy, this is a sign to the contrary.
Even with volume being unseasonably high, capacity remains plentiful as tender rejection rates (OTRI.USA) hit an all-time low of 11.4 percent yesterday. The nation’s largest single market, Atlanta, has an outbound rejection rate (4.67 percent) on par with Seattle (4.24 percent) – a market that traditionally has little issue with capacity due to its ratio of heavy inbound over outbound freight. To put it in perspective, the Seattle market averaged 6.91 percent on the Outbound Tender Rejection Index from March to the end of December last year, while Atlanta averaged 17.33 percent during the same time period. This is an indication that the market is in relative balance.
The Los Angeles market is starting to hit the radar again, as activity has returned to the West Coast after the New Year. The Outbound Tender Volume Index for L.A. hit 245 yesterday, which is as high as it has been since the week following Thanksgiving. The L.A. market is heavily influenced by inbound international shipping volume, which drove much of the freight market volume in late 2018. L.A.’s average outbound volume was approximately 9.5 percent higher in the fourth quarter than the third, whereas the general market was down almost 5 percent sequentially in the fourth quarter.
The Freightos Baltic Index that tracks the spot rate for 40-foot containers from China to North America’s West Coast took a sharp turn up this week, coming out of the holiday period. The index had been declining steadily since peaking in mid-November at a value of $2,582, hit $1,722 last week and bounced up to $2,003. This upward movement is an indication that inbound container volume has increased in that lane. The Chinese New Year is on February 6th and the tariff deadline was moved out to March 1st, so all eyes will be on the port cities to see if there is a secondary push of international shipping volume that moves the freight market in the coming month.
With volume being relatively strong in the first week of 2019 there is room for optimism over the coming weeks. So far it does not look like the first part of 2018, which had excessive amounts of volatility. Most of the data points to a slowing of growth versus a contraction. Of course, everything looks slow when you have gotten used to going 200 mile per hour.