As consumers increasingly allocate their budgets toward experiential services like travel and dining rather than purchasing physical goods, the freight transportation sector faces significant repercussions. The latest Bank of America Freight Payment Index report provides critical insights into this evolving market dynamic.
The authoritative report tracking US freight volume and expenditures reveals that while the freight market continued its downward trajectory in Q2 2023, the rate of decline has notably decelerated—potentially signaling an approaching market bottom.
Key Findings from the Q2 2023 Report
Bank of America's Q2 Freight Payment Index report, which processes $46 billion in annual payments for major corporations and government agencies, shows persistent but slowing declines across key metrics:
- Freight Volume Index: 85.6 (down 2.2% quarter-over-quarter, 22.4% year-over-year)
- Freight Expenditure Index: 189.2 (down 2.8% quarter-over-quarter, 23.5% year-over-year)
While representing the largest year-over-year declines since the index's 2017 inception, these figures show improvement from Q1's 7.8% quarterly volume drop and 27.9% annual expenditure decrease.
Regional Performance Variations
The report highlights significant regional disparities in freight volume changes:
- West: -19.8% YoY, +1.5% QoQ
- Midwest: -20.3% YoY, -2.7% QoQ
- Northeast: -25.2% YoY, +2.7% QoQ
- Southwest: -26.8% YoY, -13.6% QoQ
- Southeast: -22.9% YoY, +1.8% QoQ
Expenditure patterns followed similar regional trends, with the West showing relative resilience (-25.5% YoY, -2.3% QoQ) compared to harder-hit areas like the Midwest (-23.1% YoY, -6.0% QoQ).
Structural Shifts Reshaping the Market
Bobby Holland, Director of Freight Data Analytics at Bank of America, observes: "Our data suggests this challenging freight market may be nearing its bottom. While carriers still face headwinds, we're seeing glimmers of stabilization in freight volumes nationwide."
Bob Costello, Chief Economist at the American Trucking Associations and report author, identifies several transformative factors:
- Service Economy Expansion: Approximately 65% of consumer spending now flows to services rather than goods, directly reducing freight demand.
- Consumer Debt Pressures: Rising household debt combined with elevated goods prices constrains discretionary spending.
- Real Estate Slowdown: Higher mortgage rates cooling housing markets reduce construction-related freight.
- Industrial Production Moderation: Slowing factory output diminishes raw material and finished goods transportation needs.
"This 'freight stagflation'—combining lower volumes, suppressed rates, and higher costs—creates a triple challenge for carriers," Costello noted. "This difficult environment may drive further capacity reductions in the sector."
Diesel Price Impact on Expenditures
The report attributes part of the expenditure decline to falling diesel prices rather than pure rate reductions. National diesel averages dropped 12.5 cents per gallon in Q2, reducing fuel surcharges that comprise a significant portion of freight payments.
Market Outlook
While the slowing rate of decline suggests potential market stabilization, recovery prospects remain constrained by persistent macroeconomic challenges. The freight sector's adaptation to structural consumer spending shifts will likely determine its trajectory through 2023 and beyond.