Economic Indicators Driving the Truckload Market
Updated: Aug 12, 2022
Supply chain experts rely on a variety of data points to track truckload market activity and create forecasts. These are what we use in Cellex.
Supply Indicators: DOE Diesel Index
Measures: Average price for a gallon of diesel fuel in the
The U.S. truckload market is large and fragmented, and
there is no accurate database that measures the exact
amount of carrier capacity at any given time, so we have
to get creative to measure supply.
Why is the price of diesel so important? Fuel is a huge
part of every trucking company’s business. It accounts for
~30% of carrier's overall operating expenses, and this is
true for owner-operators and national fleets alike.
Fuel prices tend to be much more volatile than other
operating expenses (e.g. driver wages) and can fluctuate
dramatically over the course of a year. This volatility can
have a huge impact on carriers’ profitability.
When diesel prices shoot up faster than spot rates,
carriers cannot recoup all their fuel costs, and it
squeezes into their profits. If, on the other hand, fuel
prices fall faster than spot rates, carriers are more
CELLEX 101 INFO: fuel (diesel) prices are
volatile, and when they rise faster than spot
truckload rates, it cuts into carriers'
profitability and can ultimately drive capacity
out of the market.
Supply IndicatorsTruckload Market: Class 8 Truck Orders
There is a strong correlation between Class 8
truck orders and where we are in the market
As truckload rates increase, carriers will
reinvest profits back into their businesses,
buying new trucks to add capacity and/or
replace old ones.
Often times, Class 8 truck orders will continue
to rise long after spot rates have started to
fall. However, there is a several-month delay
between when a carrier places an order and
when a truck enters their fleet with a driver.
Eventually, the new capacity will flood into
the market when rates (and demand) are past their peak, contributing to excess supply and driving rates down lower.
PLEASE CONSIDER THE INFORMATION: carriers will often make long-term capacity
decisions based on short-term rate conditions. When rates are high, they tend to
overshoot, adding excess capacity that will contribute to a deflationary market.
Demand Indicators in the Truckload Market:
How much "stuff"
buying consumption, or
is the monetary
value of goods and services
purchased by U.S. consumers.
When consumption increases, it means we're buying more
"stuff". The more we buy, the more shippers will have to
produce (Industrial Production), and the more shippers
produce, the more freight will need to move (Truckload
The opposite is true when consumption declines.
NOTE: Consumer spending drives production, and
production drives truckload volume. When
consumption is high, there will be more freight volume.
When it's low, there will be less.
*Industrial Production (IP)
Measures: Production levels in the U.S. across manufacturing, mining, electric and gas industries
National production (how much "stuff" we're
making as a country) is a key influencer of
freight volume. This index has a direct impact on
how much freight is moving across the country.
NOTE: When IP is going up, expect
shipment volume to go up. When IP goes
down, it will likely mean less freight will move
(unless we import enough to compensate for
Demand Indicators in the Truckload Market:
* Inventory-to-Sales Ratio
Measures: Warehouse inventory compared to sales
The Inventory-to-Sales Ratio measures the number of months of
inventory shippers have on hand in their warehouses compared
to their monthly sales.
(Inventory Value $) ÷ (Sales Value $) = Inventory-to-Sales Ratio
When consumption is high (people are buying lots of
stuff), inventories will usually shrink as products quickly
move out of warehouses to meet consumer demand. To
replenish the inventory, shippers will produce more, driving
up Industrial Production.
When consumption is low (people buy less stuff), or if there is uncertainty in the supply chain companies will stockpile inventory, either as a strategic measure or because people aren't buying it.
NOTE: a high Inventory-to-Sales ratio will act as a brake on production. When consumer demand picks up, companies will work down their inventory first before producing more.
*ATA Truckload Tonnage
Measures: total volume of truckload shipments in the U.S.
American Trucking Associations (ATA) is the largest national trade association for the trucking industry. Every month,they publish a tonnage index based on data from their national membership.
This index gives a snapshot of current truckload shipment volume (i.e. how much "stuff" is moving throughout the country). We use this as an approximation for overall shipper demand for carrier capacity.
NOTE: when truckload volume increases relative to carrier supply, rates increase as shippers compete for capacity. When truckload volume decreases relative to carrier supply, rates fall as carriers compete for freight.
*Cass Truckload Linehaul Index
Measures: Year-over-year change in contract rate activity
In an effort to get more predictable pricing, higher-volume shippers take their forecasted shipping needs out to their carrier network for an annual bid.
In exchange for guaranteed freight volume, carriers agree on a set rate for their capacity, also known as a contract rate or a primary rate.
NOTE: contract rates are heavily
influenced by recent spot market activity,
usually trail behind spot market trends by
three to six months, and are much less