Better days for rates

After a rough start last year, 2024 likely will be more of a ‘transition to better days for rates, analysts suggest. The transportation sector can look forward to “better days” in 2024, but that’s mainly because “better” isn’t much of a stretch compared to 2023.

Even so, the trucking industry’s perception of the downturn might’ve been skewed last year, coming out of the post-pandemic trucking boom. Freight volumes actually weren’t that bad in that absolute context [in 2023], better than in 2018 and better than the pre-pandemic freight pullback in 2019.

But, compared to the boom years of 2022 and 2021, the comps were incredibly difficult. Additionally, 2023 got off to an unexpectedly bad start that prompted a lot of carriers to develop a more realistic outlook. Inflation and high diesel prices added to the pain. But a “fairly modest but pronounced firming” in freight volume marked a return to seasonality later in 2023—and an easing in inflation and fuel prices point to the beginnings of a margins recovery.

Of course, we’re still waiting for some clear signals that a restocking has begun—and that’s been a little bit harder to come by. Given some of the indicators that we’re seeing on the consumer side of things, and given many shippers have trepidation about the direction of the economy, those inventories will probably be a little bit slower to recover.

By and large, the survival of a lot of these small players has surprised us—so it could just be a matter of time. As this trough wears on longer and longer, the likelihood of capacity exits really starts to grow—and that should be a big inflection for spot prices, even in a flat volume environment.

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