Freight volumes remained strong this week and remain well above both 2018 and 2019 levels. Capacity has taken a long time to react to these elevated volume levels. Tender rejections are finally reaching levels that may suggest upward pressure on rates.
National volumes remained strong this week after two strong weeks to begin June. The Outbound Tender Volume Index currently sits at 11,324, up slightly from last week (0.84%). Despite the flattish week, yearly comparisons remain rosy (up 8% year-over-year). 2019 was considered a relatively soft freight market, so the yearly comparison does not hold as much weight as the two-year stack comparison. 2018 was a banner year for freight volumes and the current total is nearly 5% over 2018.
The Rust Belt continues to outperform relative to other regions of the country. The Commerce Department released industrial production data for May this week. Most industries posted small rebounds, but automotive vehicles and parts posted the largest gain.
It seems volumes have stabilized at this high level for the meantime. Factories are open, consumers are beginning to travel again and consumer spending data rebounded in a big way in May. The worst of the recessionary environment is behind us, but how long freight volumes can run this high will depend on the consumer, who is being partly propped up by government stimulus and generous unemployment benefits.
On the positive side, eight of the 15 major freight markets FreightWaves tracks were positive on a week-over-week basis. This ratio has been consistently high in recent weeks but deteriorated a bit this week. The markets with the largest gains this week in OTVI.USA were Fresno, California (9.08%), Dallas (7.84%) and Miami (7.67%). The markets with the largest decreases were Seattle (-9.62%), Ontario, California (-3.00%), and Memphis, Tennessee (-2.88%).
Tender rejections continue to improve with volumes
It was more of the same this week on the tender rejection side of the story. This marked the seventh week in a row in which tender rejections rose on a national level. The Outbound Tender Rejection Index crossed 7% for the first time since panic-buying and hoarding pushed the index up to 19.25% in March.
The index has been on a steady grind to the upside for the better part of two months and is nearing levels that suggest there could be upward pressure on rates in some parts of the country. It has taken some time for capacity to react to this high volume level, but it seems carriers are finally feeling confident in their ability to decline freight and shop around. So long as volumes remain elevated, tender rejections should continue pushing higher and putting pressure on rates.
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