Industry Pulse: Freight rates rise as trucking continues to boom
- Trucking shipments increased 0.9% month-to-month in March and 11.9% YoY to 1.209, while expenditures maintained the same level of growth month-to-month, with a 15.6% YoY increase, according to the Cass Freight Index.
- The continued trucking surge is prompting rates to rise, especially as driver compensation is also on the upswing, according to the American Trucking Associations.
- Due to high volumes and tight capacity, rates will likely continue to rise, which could temper the trucking boom.
While high volumes and tight capacity are definitely pushing up rates, bumpy electronic logging device (ELD) implementation may also be contributing to the rate increase.
A recent Zipline Logistics survey reported that since the April 1 deadline for ELD implementation, productivity and driver satisfaction are dropping while rates are rising and safety is improving.
Although the driver turnover rate is at almost 100%, trucking companies are upping compensation to retain drivers and meet the high volumes. The ATA reported that the median trucker salary rose 18% over the past five years.
But trucking shows no signs of slowing, and according to Cass data, consumer spending is more active than industrial spending in the trucking sector, indicating e-commerce is driving the trucking industry.
To mitigate the capacity crunch, more trucks are entering the spot market, according to DAT Trendlines, which showed an 11% jump in capacity in the second week of April — which means April capacity is already on track to outpace March capacity.
If available capacity continues to rise, that could also temper the rising rates and soon match the surging volumes.
All these factors suggest trucking could be headed for a peak soon, but if volumes continue to surge and capacity accelerates enough to catch up, the higher rates might just temper growth into a more sustainable growth trajectory.
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