U.S. freight shipping rates have likely peaked, according to new Cass Freight Index data, in another sign that inflation is easing (2024)
Trucks at the entrance to the Port of Oakland in Oakland, California, US, on Thursday, July 14, 2022.
David Paul Morris | Bloomberg | Getty Images
U.S. freight rates increased 28% year over year, but declined almost 2% month over month in July, a likely signal that the U.S. market has reached peak freight rates, according to the July Cass Freight report, just as peak shipping season encompassing both back-to-school and the holidays begins.
"We're coming into this peak season with much more free capacity. I think that's going to be a good thing from a cost perspective for those big retailers who have been strugglingwith a lot of cost inflation," Cass Index Report Author and ACT Research Sr. Analyst Tim Denoyer told CNBC.
The report comes as major retailers are set to report earnings this week. Walmart and Target have cited the need to shift inventory due to changing spending patterns and inflationary pressures on the consumer.
The Cass Freight report also follows a better-than-expected inflation reports last week that signal a potential slowdown in inflation. The SPDR S&P Retail ETF has gained nearly 12% in August compared to a 4% move higher for the S&P 500.
CNBC received a first look at the data compiled by Cass Information Systems that reviews rates and shipments in the North American market.
Shipments, freight moved by companies, increased by 0.4% year over year, according to the report, but declined nearly 2% month over month.
"The market balance has really shifted. It's steady on the demand perspective, but supply has grown," Denoyer said.
Even with shipment trends flattening, demand remains elevated over pre-pandemic levels, and U.S. logistics companies, especially trucking companies, should continue to see strong pricing power, according to Denoyer. The Covid crisis led many independent truckers to leave the industry, and in 2021, the American Trucking Association released a report finding the nation's trucker shortage reached a record 80,000.
That report also found 1,000,000 new truckers would be needed over the next decade to maintain current levels.
The sales price of a used Class 8 Truck (the tractor of a tractor-trailer) has doubled since 2019, according to ACT Research data. Denoyer says that has been a factor in keeping new companies and drivers from entering trucking, and will continue to influence the freight supply and demand balance.
"U.S. truck prices have become a significant barrier to entry. I think that's going to continue and that has been a big factor for capacity," he said.
Trucking stocks have benefitted from the pricing power and steady demand.
U.S. freight shipping rates have likely peaked, according to new Cass Freight Index data, in another sign that inflation is easing. U.S. freight rates
freight rates
A freight rate (historically and in ship chartering simply freight) is a price at which a certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport (truck, ship, train, aircraft), the weight of the cargo, and the distance to the delivery destination.
However, because of the extreme rise in shipping costs during the pandemic, shipping costs accounted for between roughly 3.6 and 5.9 percentage points of the increase in import price inflation each year.
Basic Info. US Transportation Services Index: Freight is at a current level of 138.10, up from 134.00 last month and down from 139.60 one year ago. This is a change of 3.06% from last month and -1.07% from one year ago.
Another cause of freight increases, related to capacity, is the inability to quickly put new trucks to work due to longer registration times at the DMV, due to fewer workers and appointment-only DMVs, coupled with crazystartup insurance costs for new truckers, and complicated cross-state regulations that are harder and ...
Because of the impact of higher inflation from driver wages, fuel prices, and interest rates and their downstream effects, FreightRun expects freight rates to go higher in 2024 even if the economy slows down – stagflation is a real possibility.
Container freight rates oscillated dramatically between January 2023 and March 2024. Freight rates slumped to their lowest level on the 26th of October 2023, when the going rate for a 40-foot container was only 1,342 U.S. dollars.
Increases in shipping costs are followed by sizable increases in import prices, PPI, headline, and core inflation. The impact is similar in magnitude but more persistent than for shocks to global oil and food prices.
Rates for cargo headed to the U.S. are still rising
Amid the recent freight rate spikes which sent spot container prices as high as $10,000, and resulted in some shippers moving more cargo to air freight, experts have worried about ocean carriers taking advantage of the crisis to excessively jack up prices.
Since 1995, the Cass Freight Index® has been a trusted measure of the North American freight market. Our monthly data and the Cass Transportation Index Report provide valuable insight into freight trends as they relate to other economic and supply chain indicators and the overall economy.
Last week, ocean rates from Asia to North America surged, with rates to the West Coast increasing by 38% to surpass the $4,000 per forty-foot equivalent unit (FEU) mark. Rates to the East Coast also climbed by 21%, reaching around $6,000 per FEU.
The survey shows expectations for a slight turnaround in freight volume in the second half of 2024. Half of respondents expect a 5% increase; 33% expect a 10% increase; and among the 17% that were the most optimistic, a 15% increase is anticipated.
“We're continuing to see those rates drift down,” Rogers said. “That may continue through the rest of the year. Lars Jensen, Vespucci CEO, said he expected the spot rate decline to continue, but rates will vary depending on the global trade lane.
Largest container carriers are cutting sailings and face prospects of weaker prices in the months ahead. It has been an anemic peak season for ocean freight haulers as container shipping rates have plunged from pandemic highs and Americans and Europeans continue to pull back on purchases of consumer goods.
However, like truckload, we expect volume to pick up in the second half of the year. The overall impact of LTL rate increases won't be as muted as in 2023. We expect a three to five percent rate increase to be where we end up for LTL rate inflation in 2024.
The balance between market supply, freight demand and operating expenses dictates truckload freight rates. In 2024, I expect demand to remain low, particularly in the dry van sector, most expenses to rise and for capacity to exit the market before mid-year.
Texas: The Lone Star State's Dominance in Freight Transportation. Texas, the second-largest state in the U.S., naturally claims a leading role in the trucking industry. With its extensive highways and a thriving economy, Texas provides a robust infrastructure that efficiently handles the high volume of freight loads.
On average, a small package can cost about $8, while large packages can cost about $18 to $21 for shipping.” To determine what your individual business shipping rates may be, answer questions such as: Speed: Are you expediting shipping to get the package to your customer quicker?
The delivery giants announced a 5.9% average rate increase on their various shipping services that will take effect on Dec. 26 for UPS and Jan. 1 for FedEx. It's a smaller increase than the 6.9% bump both unveiled for 2023 as they contend with declining demand.
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