The supply chain and logistics industries are constantly evolving, influenced by economic conditions, demand fluctuations, and changing transportation dynamics. For companies and supply chain professionals, staying informed about key freight and expenditure indicators is crucial for effective planning and decision-making. One of the most reliable tools for tracking these trends is the Cass Freight Index, which provides critical insights into freight shipments and expenditures. The October 2024 release of the Cass Freight Index offers valuable data on both shipments and expenditures, shedding light on current market conditions and the trajectory of freight costs in the U.S. economy.
In this blog post, we’ll take a detailed look at the Cass Freight Index for October 2024, breaking down the key findings and offering actionable insights for businesses to navigate the current freight environment.
Overview of the Cass Freight Index - Shipments
The shipments component of the Cass Freight Index is a widely watched metric for tracking the volume of freight moving through the U.S. market. For October 2024, the shipments index experienced a 1.9% decline month-over-month (m/m), following a similar decrease of 1.7% in September. This suggests a sustained softening in freight activity, even as broader economic factors like goods demand growth continue to influence freight volumes.
Key Highlights from the October 2024 Shipments Data:
Month-over-Month (M/M) Change: Shipments fell 1.9% in October, adding to a 1.7% decline in September.
Year-over-Year (Y/Y) Change: There was a 2.4% decline in shipments in October, following a 5.2% drop in September. This indicates a somewhat improving trend in the year-over-year performance, though still negative.
Seasonally Adjusted (SA) Change: When adjusted for seasonal factors, shipments were essentially flat, with only a 0.1% decrease from September.
What’s Behind the Decline in Shipments?
Several factors contribute to the ongoing softness in shipments, particularly in the for-hire market. Although there is broad freight volume growth in areas like intermodal, imports, and freight GDP, these gains are not fully reaching the for-hire market, which typically relies on carriers like those in the truckload (TL) and less-than-truckload (LTL) segments.
One significant factor influencing this trend is the continued growth of private fleets. As private fleet capacity expands, demand for external, for-hire services declines. This is particularly notable in light of the rebound in Class 8 tractor sales in the second quarter of 2024, following earlier supply constraints. Despite this rebound, the demand for external truckload capacity has remained sluggish, suggesting that private fleets are absorbing a larger share of freight volume.
Furthermore, freight capacity in the for-hire market has contracted. For example, publicly traded fleets were 5.9% smaller in Q3 2024 compared to the previous year. While the contraction in fleet size is slowing, the low-margin environment and lack of investment motivation are contributing to a relatively balanced truckload market, which will likely remain subdued until at least early 2025.
Cass Freight Index - Expenditures: What’s Driving Costs?
The expenditures component of the Cass Freight Index, which tracks the total amount spent on freight, offers insights into cost trends and pricing dynamics in the freight market. In October 2024, the expenditures index saw a 1.5% month-over-month (m/m) decline, partly due to a drop in fuel prices. This decline in fuel costs was a major factor behind the moderation in year-over-year declines in expenditures, with the Y/Y decline narrowing to 5.9% in October from 6.6% in September.
Key Insights from the Expenditures Data:
Month-over-Month (M/M) Change: Expenditures fell 1.5% m/m in October, largely driven by a decrease in fuel prices.
Year-over-Year (Y/Y) Change: Expenditures declined by 5.9% compared to October 2023, showing a continued contraction, though at a slower rate than previous months.
Inferred Freight Rates: Rates, which are derived by dividing expenditures by shipments, saw a modest 0.4% rise m/m in October, reflecting slight rate increases across various freight modes.
In seasonally adjusted (SA) terms, expenditures fell by 1.7% from September, with rates down by 1.5%, signaling a broader cooling of freight costs.
Trends in Freight Rates: The Inferred Freight Rate Outlook
The inferred freight rates component of the Cass Freight Index provides a snapshot of how freight costs are changing relative to shipment volumes. In October 2024, inferred freight rates rose 0.4% m/m, following a more significant 4.2% rise in September. However, on a year-over-year (Y/Y) basis, inferred freight rates were down by 3.6% in October, primarily due to lower fuel prices.
Looking ahead, freight rates are expected to follow normal seasonal patterns, with a forecasted 3%-4% decline Y/Y in November, followed by a slight uptick in Q1 2025. For the full year 2024, inferred freight rates are expected to be down by 7%-8%, a reflection of the broader freight rate environment in the U.S.
Cass Truckload Linehaul Index: A Key Indicator of Truckload Costs
The Cass Truckload Linehaul Index, which tracks changes in the linehaul component of truckload freight costs, increased 0.7% month-over-month (m/m) in October. This marks the second consecutive increase, following a cycle-low in August 2024. On a year-over-year basis, the index’s decline narrowed to 2.2% in October, compared to a 3.5% decline in September.
This rebound in truckload linehaul rates could signal a slight recovery in the broader truckload market, particularly as spot rates have started to rise, and there are signs of increased activity in contract rates. Although a full recovery in truckload rates is unlikely until early 2025, these early signs of stabilization in rates are important for shippers and carriers to monitor.
Freight Market Outlook: Capacity, Demand, and Rate Trends
As we move toward the end of 2024, the truckload market is characterized by a balanced but changing environment. On one hand, private fleet growth is slowing, which should eventually lead to increased demand for for-hire services. On the other hand, for-hire fleets have contracted significantly, with publicly traded fleets shrinking by 5.9% in Q3 2024.
In this context, capacity constraints are playing a significant role in shaping the freight market. The gap between the 5.9% contraction in fleet capacity and the 2.8% decline in shipments from Q2 to Q3 has likely contributed to the slight uptick in truckload rates. As capacity tightens and demand gradually increases, the truckload market may experience slow but steady improvement in the coming months.
What Does This Mean for Businesses and Supply Chains?
The data from the Cass Freight Index paints a picture of a freight market that is experiencing a mix of softness in shipments, moderating freight expenditures, and slightly rising rates in certain sectors. Here are a few key takeaways for businesses navigating the supply chain landscape:
Prepare for a Prolonged Period of Softness: While there is some recovery in freight rates, the overall market remains soft, particularly in the for-hire truckload and LTL sectors. Businesses should plan for continued volatility in freight volumes and costs.
Monitor Capacity and Demand Trends: With capacity contraction and rising spot rates, businesses should stay attuned to changes in the market that could affect pricing and service levels.
Optimize Shipping Strategies: In a fluctuating freight environment, it’s essential to optimize shipping strategies. This may involve route optimization, negotiating better rates with carriers, or investing in transportation management systems (TMS) to improve cost control.
Leverage Forecasting and Consulting Services: To navigate these uncertain times, businesses can benefit from supply chain consulting services like those offered by Gain Consulting. Our team can help companies understand market trends, forecast rate changes, and implement strategies to minimize freight costs while maintaining efficiency.
Conclusion
The October 2024 Cass Freight Index reveals a freight market that remains in transition, with softness in shipments, moderating expenditures, and a slight increase in rates. For businesses in the supply chain space, understanding these trends and planning accordingly will be key to maintaining competitive advantage and minimizing costs in an evolving market. By staying informed and agile, companies can continue to thrive despite the challenges presented by shifting freight dynamics.
At Gain Consulting, we specialize in helping businesses navigate these complex market shifts with tailored solutions and expert insights. Contact us today to learn how we can help optimize your supply chain and transportation strategies for the future.
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