Truckload supply and demand on collision course in 2024
Trucking demand is up while capacity is down since this time last year. This statement by itself means that the transportation market is healthier, but it also suggests that 2024 should be better in aggregate as the gap between supply and demand narrows quickly.
Truckload demand is barely a shadow of what it was during the pandemic, but it has been growing throughout most of 2023. This fact has been invisible to most carriers and 3PLs, which continue to deal with a massive glut of oversupplied capacity thanks to a record number of entrants in 2020-21 according to Carrier Details Total Trucking Authorities data set.
Tender volumes are averaging over 10% higher year over year this December and have been growing steadily since last winter. Outside of October, daily tender volumes moved higher, suggesting that economic demand for goods has grown.
On this past week’s Freightonomics episode, Zac Rogers, an associate professor of supply chain management at Colorado State and co-author of the Logistics Managers’ Index (LMI), suggested that the demand growth was a product of both inventories having been rightsized versus this time last year and growth in consumption.
While he admits that there is some ongoing concern about consumer health, the numbers are what they are. Anthony Smith, FreightWaves’ chief economist, responded to his concerns with a resounding “never bet against the American consumer.”
Possibly the most shocking revelation was in the LMI outlook of transportation prices by respondents. The LMI is divided up into multiple measures of logistics activity such as transportation and warehousing prices and capacity. Values above 50 indicate expansion while values below 50 are contractionary.
The transportation pricing component has averaged a value of 38 in 2023 and has been showing below 50 since the summer of 2022. Respondents to the November survey showed a reading of around 64 for prices in 2024, indicating that most expect rates to have bottomed.
While every forecast is an opinion on some level, the data does suggest that the supply of capacity and demand for its use is moving back toward equilibrium at a relatively fast clip.
Source: freightwaves.com
