While summer typically marks a seasonal slowdown for freight transportation, the trucking market has unexpectedly experienced a significant upswing. Recent data from DAT Solutions reveals rising rates across both spot and contract markets, fueled by macroeconomic factors and industry-specific changes.
Spot Market: Surging Demand Outpaces Capacity Growth
July's spot market performance showed remarkable strength across all metrics:
- 89% year-over-year increase in load volume, indicating substantially higher demand for trucking services
- Merely 0.3% capacity growth , creating significant supply-demand imbalance
- 81% increase in van load-to-truck ratio , driven by retail and e-commerce activity
- 9.8% rise in van spot rates due to tightening capacity
- 156% surge in flatbed load-to-truck ratio , potentially linked to construction and manufacturing sectors
- 14% jump in flatbed spot rates , outpacing other equipment types
- 68% growth in reefer load-to-truck ratio , reflecting increased perishable goods transportation
- 7.8% increase in reefer spot rates
- 3.8% fuel price hike , adding to transportation costs
This momentum continued into August, particularly in the Midwest region. DAT analyst Peggy Dorf noted sustained increases in van and reefer load-to-truck ratios, with particularly strong demand emerging from Northeast population centers - likely tied to back-to-school retail inventory replenishment.
Contract Market: Lagging Behind but Poised for Growth
DAT pricing analyst Mark Montague observed that while 2014 marked the trucking industry's peak performance, subsequent years saw declining rates following an oil price collapse. Contract rates maintained modest growth through 2015 before flattening in 2016 and continuing through 2017.
However, Montague anticipates the spot market's strength will eventually translate to contract rates, predicting approximately 3% growth. A key factor in this projection is the impending Electronic Logging Device (ELD) mandate.
ELD Mandate: Industry Transformation Ahead
Montague identifies the ELD implementation as a significant driver of current and future rate increases, with multiple potential impacts:
- Higher operational costs: ELDs enforce accurate driving time recording, reducing productivity loopholes
- Market consolidation: Smaller fleets may exit the market due to compliance costs
- Rate increases: Reduced capacity could drive prices higher, particularly during peak seasons
Montague suggests the Federal Motor Carrier Safety Administration consider delaying the ELD implementation until early 2018 to avoid disrupting holiday supply chains.
E-Commerce: Fueling Spot Market Activity
The analyst directly links July's rate increases to Amazon's Prime Day event, which redirected substantial freight volume toward retail rather than industrial channels. This pattern demonstrates e-commerce's growing influence on spot market dynamics.
Dorf adds that last year's holiday season saw significant trucking activity tied to e-commerce distribution, as platforms moved inventory from central warehouses to localized fulfillment centers for final delivery. This model increasingly relies on spot market capacity to handle demand fluctuations.
Carriers Adjusting Strategies
With spot rates significantly outpacing contract rates, major carriers are reportedly reevaluating their market approaches. Montague notes increased interest from large carriers in spot market opportunities, though maintaining long-term customer relationships remains a priority.
Outlook: Moderate Growth with Challenges
Montague projects continued freight market growth through 2017, supported by anticipated 2.5% GDP growth. While declining auto sales present a headwind, positive retail, consumer spending, and food production indicators provide counterbalance.
The summer's unexpected freight market strength offers encouraging signs for the industry, though uncertainties remain regarding ELD implementation and e-commerce demand patterns. Carriers must maintain flexibility to navigate these evolving market conditions.