Introduction: The Pulse of Freight Markets in Economic Weather
In today's rapidly evolving global economy, the logistics sector serves as a crucial barometer of economic activity. Fluctuations in freight volumes and transportation pricing reflect the underlying health and trajectory of broader economic conditions. The TD Cowen/AFS Freight Index, a quarterly report jointly published by investment firm TD Cowen Inc. and third-party logistics provider AFS Logistics LLC, provides critical visibility into these market dynamics through comprehensive analysis of pricing, volume, and cost metrics across key transportation modes.
1. The TD Cowen/AFS Freight Index: A Comprehensive Pricing Barometer
Launched in October 2021, the index serves as a predictive pricing tool for TD Cowen's institutional clients, covering less-than-truckload (LTL), truckload (TL), and parcel shipping (divided into express and ground services). Its analytical strength derives from AFS Logistics' extensive freight data across all transportation modes.
1.1 Data Foundations: AFS Logistics' Comprehensive Dataset
The index leverages AFS Logistics' proprietary data encompassing:
- Transportation pricing including base rates, fuel surcharges, and discounts
- Volume metrics across shipment counts, weights, and dimensions
- Operational cost components including labor, equipment, and fuel expenses
- Customer profiles by industry, size, and geographic distribution
- Carrier performance benchmarks and service capabilities
1.2 Analytical Methodology: Machine Learning Meets Economic Factors
The index employs advanced analytical techniques including:
- Data cleansing and preprocessing to ensure quality
- Feature engineering to extract meaningful patterns
- Machine learning model selection and training
- Performance evaluation and optimization
- Predictive forecasting and trend analysis
2. Q3 Key Findings: Transportation Mode Analysis
2.1 Parcel Shipping: Unprecedented Discounting Amid Soft Demand
The index revealed record discounting activity as carriers competed for market share, with broader customer eligibility for discounted programs effectively offsetting accessorial fee increases. Notably, while carriers adjusted fuel surcharges upward by 2.3%, substantial discounts resulted in a 6.8% quarterly decline in net fuel surcharge per package.
Ground Parcel Performance
The ground parcel rate index fell sharply from 26.2% in Q2 to 20.3% in Q3 (against 2018 baseline), reaching its lowest level since 2021. This decline stemmed from a 2.4% increase in average discounts and 7.1% quarterly reduction in average accessorial fees.
Express Parcel Trends
Express parcel rates declined from 4.5% above baseline in Q2 to just 1.6% in Q3, influenced by a 9.1% quarterly drop in Gulf Coast jet fuel prices and corresponding carrier surcharge adjustments.
2.2 LTL Market: Declining Weights Meet Pricing Discipline
Average shipment weights decreased 1.9% quarter-over-quarter while carriers maintained pricing discipline, limiting cost per shipment declines to just 0.6%. The index forecasts Q4 pricing at 65.0% above 2018 baseline, marking four consecutive quarters of annual increases.
2.3 Truckload Sector: Persistent Softness in Challenged Market
The truckload market continues facing demand weakness and excess capacity, with linehaul costs recording seven consecutive quarters of year-over-year declines. The index projects Q4 rates will remain near recent lows at 4.9% above 2018 baseline.
3. Strategic Implications and Outlook
The index highlights several critical trends for logistics professionals:
- Parcel carriers are trading profitability for market share through aggressive discounting
- LTL providers demonstrate remarkable pricing power despite volume softness
- Truckload operators face prolonged challenges from capacity oversupply
Looking ahead, market participants should monitor:
- E-commerce growth driving parcel demand
- Potential LTL market consolidation
4. Conclusion: Navigating Complex Market Dynamics
The Q3 freight index reveals a transportation sector in transition, with distinct challenges and opportunities across modes. Shippers and carriers alike must leverage data-driven insights to optimize strategies in this evolving landscape, balancing short-term tactical responses with long-term strategic positioning.