While e-commerce platforms prepare for frenzied holiday shopping sprees, U.S. freight carriers face an unexpected paradox: struggling to fill their trucks despite peak season demand. This counterintuitive scenario emerges from the latest Freight Index Report jointly released by TD Cowen and AFS Logistics, which reveals starkly different pricing trajectories across parcel, less-than-truckload (LTL), and truckload (TL) markets.
The proprietary freight index, first launched in October 2021, combines AFS Logistics' massive freight payment database with machine learning analytics to provide predictive pricing tools for institutional investors. The model incorporates both macroeconomic factors and industry-specific variables, including recent general rate increases (GRI) announced by major parcel carriers.
Parcel Sector: Unprecedented Discounts Offset Fee Increases
The report shows tepid demand has forced parcel carriers to offer historically deep discounts across broader customer segments and service categories. These concessions have effectively neutralized fuel surcharge increases, resulting in lower overall shipping costs.
While Q3 fuel surcharges rose 2.3%, "aggressive discounting completely offset this increase, resulting in a net 6.8% quarterly decline in per-package fuel surcharges." The ground parcel price index plummeted from 26.2% above 2018 baseline levels in Q2 to just 20.3% in Q3—the lowest reading since 2021—driven by a 2.4% increase in average discounts and 7.1% reduction in per-package accessorial fees.
For Q4, analysts anticipate intensified price competition during the holiday season, with major shippers securing deeper discounts. The ground parcel index is projected to rise slightly to 21.5% above baseline, still representing a 1.8% year-over-year decline.
Express parcel metrics showed similar trends, with the price index dropping from 4.5% to 1.6% above baseline. A 9.1% quarterly decline in Gulf Coast jet fuel prices allowed carriers to reduce fuel surcharges by 2%, while expanded discounts drove net fuel fees down 4.9%. The express index is forecast to dip another 0.2% in Q4.
LTL Market: Declining Shipment Weight Meets Resilient Pricing
The LTL sector continues to see shrinking shipment weights, with Q3 averages falling 1.9% quarterly. However, carriers have maintained pricing discipline, limiting the rate decline to just 0.6% through effective yield management and longer average hauls.
LTL rates are projected to reach 65% above 2018 levels in Q4—a 0.5% quarterly increase and 2.2% annual gain. This would mark the fourth consecutive quarter of positive growth, signaling persistent upward pricing pressure despite softening demand.
Truckload Sector: Oversupply Challenges Persist
The report suggests recent Federal Reserve rate cuts won't provide immediate relief to the truckload market, which continues grappling with weak demand and excess capacity. While linehaul costs have declined year-over-year for seven consecutive quarters, they remain 12-14% above pre-pandemic levels.
The truckload per-mile rate index is expected to hover near its six-quarter low, edging up slightly from 4.6% to 4.9% above 2018 baseline in Q4. "The market shows no signs of meaningful recovery in the near term," the analysis concludes, noting persistent challenges from soft freight volumes and elevated equipment inventories.
AFS Logistics CEO Andy Dyer observed: "While Fed rate cuts bode well for truckload and LTL carriers' long-term outlook, our data shows negligible impact on Q4 pricing. The parcel sector faces additional holiday season complexities, with depressed demand forcing carriers to counterbalance their own pricing adjustments through expanded discounts."