The latest TD Cowen/AFS Freight Index report serves as a barometer for the logistics market, indicating a potentially lackluster peak season ahead while revealing complex and divergent trends across truckload (TL), less-than-truckload (LTL), and parcel shipping segments. This joint initiative between New York investment firm Cowen Inc. and Louisiana-based third-party logistics provider AFS Logistics LLC provides institutional clients with forward-looking pricing insights across key transportation modes.
By combining AFS's extensive freight data with advanced analytics including machine learning, the index offers comprehensive market visibility. The model incorporates both macroeconomic and microeconomic factors, along with recent general rate increase (GRI) information from major parcel carriers, to provide valuable benchmarks for industry participants.
TD Cowen/AFS Freight Index: Illuminating Past Performance and Future Trends
Tom Nightingale, CEO of AFS, noted: "This summer's UPS-Teamsters negotiations and Yellow Corporation's bankruptcy put logistics managers on edge, forcing risk assessments and contingency planning. Yet despite these disruptions pressuring certain transportation markets, weak demand and current macroeconomic conditions have given shippers some breathing room."
Key Findings Across Transportation Modes
1. Less-Than-Truckload (LTL)
- Rate Increases: Q3 LTL rates rose 2.2% year-over-year, primarily driven by Yellow's exit. Approximately two-thirds of this increase came from higher average linehaul rates as carriers showed pricing restraint before Yellow's collapse and its freight shifted to higher-priced LTL carriers. Fuel surcharges also jumped nearly 20% from Q2.
- Outlook: Q4 rates per pound are projected to rise for the second consecutive quarter, up 59.3% from the January 2018 baseline but down 3.2% year-over-year.
2. Parcel Shipping
- Ground Services: Q3 saw the first annual ground parcel rate decline since 2019, attributed to aggressive discounting amid soft demand. Average discounts increased by one percentage point—the largest quarterly jump this year. Q4 rates are expected to rise 1.5% due to anticipated peak season surcharges from UPS and FedEx, though still projected to decline 0.7% year-over-year.
- Express Services: Q3 express rates fell 2.3% quarter-over-quarter due to increased discounts (up 0.8%) and lower billable weights (down 4%), offsetting a 14.6% fuel surcharge increase. Q4 is forecast to grow 1.7% sequentially and 2.5% year-over-year, consistent with recent trends.
3. Truckload (TL)
- Rate Stability: The per-mile rate index climbed to 4.4% above the January 2018 baseline in Q3, up slightly from 4.3% in Q2.
- Outlook: Q4 activity is expected to remain "relatively flat, improving slightly to 4.6%" above baseline, aligning with muted peak season expectations. Increased short-haul volumes helped reduce per-shipment costs in Q3, likely reflecting shippers' network optimization efforts.
Market Dynamics and Influencing Factors
The current macroeconomic environment—characterized by high inflation, rising interest rates, and geopolitical tensions—continues to suppress freight demand as consumer spending and business investment slow. This has strengthened shippers' negotiating position against carriers.
Yellow Corporation's bankruptcy significantly impacted LTL markets by reducing capacity and altering competitive dynamics. Meanwhile, carriers are adjusting pricing strategies—including discount programs and fuel surcharges—to navigate soft demand conditions.
Shippers are responding with operational adjustments, including logistics network optimization and inventory management strategies that favor shorter hauls. These measures contributed to the Q3 reduction in truckload per-shipment costs.
Future Outlook: Navigating Challenges and Opportunities
While economic uncertainty and supply chain risks persist, emerging technologies like autonomous trucks and blockchain promise future efficiency gains. E-commerce growth continues to reshape parcel markets, though current conditions favor shippers through improved rate environments.
The TD Cowen/AFS Freight Index provides crucial visibility into these complex market dynamics. Success in this environment will require adaptability from both shippers and carriers—whether through operational optimization, strategic pricing, or technological innovation—as the industry prepares for what may be an unusually quiet peak season.