Freight demand across the U.S. is showing signs of softening heading into the peak fall shipping season, in a turnaround from the rush to restock that strained capacity and led to surging prices last year.
Freight rates are pulling back from historic highs, according to trucking-sector measures, and executives say the flood of shipments from retailers and manufacturers is flattening out and even falling in some markets as high inflation and shifting consumer buying patterns leave many companies overstocked.
The closely watched Cass Freight Index, which measures shipping demand in the U.S., declined 1.7% from June to July, the second straight month-to-month drop. The index released Monday by Cass Information Systems Inc., edged up 0.4% from a year ago but it remains barely above its level in January.
Freight rail volumes are faltering, declining 2.6% overall in the first week of August from the same week last year after barely growing in July, according to the Association of American Railroads. Intermodal traffic, in which railroads carry containers and truck trailers in operations that are most sensitive to consumer demand and international trade, was down 3.4% year-over-year last week.
“We’ve seen a weakening due to the shift in consumption into services instead of goods,” said Avery Vise, a vice president at freight research firm FTR Transportation Intelligence.
The push by retailers to replenish depleted inventories and the rapid shift to online consumer sales early in the pandemic pushed double-digit shipments gains for many trucking companies and set off a scramble to get more drivers and trucks as pricing skyrocketed. Trucking executives say the surge has waned more recently but that shipments remain high even if the growth has pulled back.
Mark Rourke, chief executive of Green Bay, Wis.-based truckload carrier Schneider National Inc., said in a July 28 investor earnings call that the market chaos over the past two years is moderating.
Shipment counts at Thomasville, N.C.-based Old Dominion Freight Line Inc., one of the largest U.S. truckers, had been growing at a double-digit pace over recent quarters but expanded only 2.8% in the second quarter. Chief Executive Greg Gantt said shipping demand is following more stable, seasonal patterns following volatile and unpredictable swings during the pandemic.
“I would say that we’re a little bit below our normal seasonality,” Mr. Gantt said in a July 27 earnings conference call.
Recent trends in trucking’s spot market suggest the pullback is continuing this month.
DAT Solutions LLC, which matches trucks and available loads in the truckload spot market, said posted loads on its platform fell 26% from June to July and fell another 11% in the first full week of August.
Another load board, Truckstop.com, said its index of market demand fell for the eighth straight week over the past week. Average rates in the dry-van sector, the tractor-trailer operations at the heart of the trucking business, fell in the past week to $2.25 per mile, excluding fuel surcharges, the lowest level since February 2021, the Idaho-based firm said.
Bob Biesterfeld, chief executive of C.H. Robinson Worldwide Inc., the largest freight broker in the U.S. by revenue, said the slowing growth may suggest the market is returning to normal rather than retrenching after two years of upheaval.
“I think we’re starting to find normal again. And I think we’re all so used to the chaos of the past couple of years, and it kind of feels good but it’s kind of scary,” Mr. Biesterfeld said. “We’re not sure if it’s recessionary or if it’s just, we’re getting back to a place of more normal distribution.”
Still, C.H. Robinson is halting its aggressive hiring program and expects its head count to stay flat or decline for the rest of the year through attrition.
“Should we see economic conditions, or more specifically, our business results change significantly, then we would take additional steps around head count, but that’s not part of the base plan today,” Mr. Biesterfeld said.
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