The Outbound Tender Volume Index (OTVI) contracted slightly again this week, down 1.2% to 13,647. We must adjust for the level of rejected tenders accounted for in OTVI to get a clearer look at year-over-year comparisons. On a rejection-adjusted basis, volumes are up 19% y/y, a slight acceleration from last week’s 18% growth rate.
Freight volumes have been trending sideways since the first week of January, bouncing between 13,600 and 14,200. This is typical for January, when freight flows lull in the early weeks of the year. While this year is following a similar pattern, it is at an extraordinarily high level. If the pattern continues, we might expect to see volumes pick up speed toward the end of February.
Consumer spending continues to impress, according to data from Bank of America. BofA estimates January retail sales were up 4.6% month-over-month seasonally adjusted, excluding autos — a very robust number. Total card spending based on aggregated credit and debit card data increased 9.7% y/y for the seven days ending Feb. 6. Since the beginning of the year, total card spending is running at an average 5.6% y/y pace, up notably from the December average of 2.5% y/y.
The most important development in consumer spending over the past week has been California. California has had some of the strictest COVID-related restrictions on business throughout the pandemic as the nation’s most populous state battled multiple extreme outbreaks. But on Jan. 25, the state eased its COVID-related restrictions, and it has had an immediate impact on consumer spending.
In the latest data, California’s total card spending was up a torrid 9.5% y/y, a huge reversal from -1.1% y/y the prior week. The gain was broadly driven by higher brick-and-mortar retail (furniture, department stores and clothing) and restaurant spending, which likely reflects the easing of COVID-related restrictions in the state.
(Chart: Bank of America)
This is great news. California’s economy makes up 15% of U.S. GDP, and if California were a country, it would have the fifth-largest economy in the world, more productive than India and the United Kingdom. The California situation could be a microcosm of the country as a whole. Most individuals are eager to get out of their houses and into stores and restaurants.
On a positive note, nine of the 15 major freight markets that we monitor as a broad, representative benchmark were positive on a week-over-week basis. This ratio strengthened back to the stronger levels it has become accustomed to in recent months as the freight market rallies. The markets with the largest gains this week in OTVI.USA were Newark, New Jersey (16.46%), Cleveland (10.86%) and Laredo, Texas (9.60%). The markets with the largest drops were Indianapolis (-10.38%), Atlanta (-7.09%) and Miami (-4.85%).
Tender rejections remain elevated but continue to slip
The Outbound Tender Reject Index (OTRI) declined marginally this week from 22.4% last week to 21.2% currently. OTRI has stabilized after declining roughly 6 percentage points since the Christmas peak. OTRI has been trending sideways, moving less than 2 percentage points over the past month.
Network imbalances and severe winter weather have impacted truckload capacity negatively as covering loads became increasingly difficult in the back half of last week when tender rejection rates jumped to nearly 23% as contracted truckload tenders slid.
The current national rejection rate sits at 21.2%, a remarkably high level during a seasonally soft period for truckload freight. The current rejection rate is more than 1,500 basis points higher than year-ago levels and nearly 1,400 basis points higher than 2019 levels. The extraordinary tightness in the truckload market is resulting in truckload contract rates being negotiated higher in the upper single digits to low double digits.
Securing reefer capacity is still the most difficult of the trailer types within SONAR as reefer rejections rebounded over the past week. Reefer rejections, which had been sliding for much of 2021, bounced off 40% and currently sit at 41.21%, nearly 3,000 basis points higher than last year.
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