Transportation prices up in February but capacity grows faster
Transportation prices grew from depressed levels for a second time in as many months during February, a Tuesday supply chain report showed. However, the rate of growth in transportation capacity was higher, signaling a meaningful recovery in the freight cycle is not yet underway.
The subindex for transportation prices (57.6) increased 1.8 percentage points sequentially in February, according to data compiled in the Logistics Managers’ Index (LMI). Prior to January, the index had been in contraction territory since July 2022.
The LMI is a diffusion index. A reading above 50 indicates expansion while one below 50 signals contraction.
Upstream firms (60.9), like wholesalers and manufacturers, returned a stronger price indication than downstream firms (52.7) like retailers. The overall transportation pricing subindex slowed as February progressed. It registered a 62 in the first two weeks of the month compared to 52.4 in the back half of the month.
The trend was similar to the spike in truckload spot rates captured by FreightWaves SONAR. Severe winter storms in January forced many carriers to park trucks for several days, reducing overall capacity and providing a temporary lift in rates. The backlog of freight took a couple of weeks to unwind. As it unwound, so did spot rates.
The LMI data also includes transportation rates from other modes, like ocean shipping, where rates have spiked due to the Red Sea conflict, drought conditions at the Panama Canal and the run-up to Lunar New Year.
Chart: (SONAR: NTIL.USA). The National Truckload Index (linehaul only – NTIL) is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel. To learn more about FreightWaves SONAR, click here.
Transportation capacity (60.9) expanded further, up 6.4 points, as utilization (56.5) stepped 1.5 points higher.
The report said the growth rate in capacity outpacing the growth rate in pricing suggests “we have not yet entered a true growth period in the freight market.” However, an inflection appears to be on the horizon. Survey respondents returned a barely-positive reading of 50.5 for transportation capacity one year from now compared to a more pronounced jump in prices (77.1). The future take on prices was 3.4 points higher than last month’s expectation.
Source: freightwaves.com
