2019 has been a difficult year for those with significant long exposure to spot rates, be they Carriers or 3PLs with limited contractual business. Rates have been depressed nearly all year and though volumes have been relatively strong, albeit slightly down when compared to last year, spot market volume has been muted.
Forward. Get comfortable with that word because it will find its way into your world more and more each day. Why? Well, aside from futures contracts serving as an instrument to lock in prices in advance, on a very basic level they provide guidance on not only what the market believes futures prices to be but also what price a company hedging via freight futures can effectively secure.
Finally, the wait is over. Gone are the days of questioning the true value of a lane because for the first time in history, the freight industry now has publicly broadcasted and transparent rates per mile for everyone to see.
Economically speaking, not much has changed since our February letter. The US economy has slowed from its rapid expansionary pace but continues to exhibit strong growth.
Now, without getting too full of ourselves, we’d like to remind the reader that we pride ourselves at K-Ratio as being completely unbiased in our perception and presentation of the marketplace and its conditions.
Now, we do not claim to know the future. If we did, you wouldn’t be reading this; but we can use the past freight movement patterns and present macroeconomic situation to rationally predict what may come ahead.
It’s quiet. There is no arguing that, but readers of this newsletter know our take on the calm in the market is one of seasonality, not of weakness in the industry or the economy in general, be it national or global.
Firstly, we know the demand for trucks has not eased as all macro indicators still point to increased shipments.
PPI continues to grow (.3% June 2018), alongside the US economy as a whole (4.1% Q2 GDP), while CPI less food, energy, and services is dropping (-0.2% June 2018).
According to FMCSA data, the trucking industry has added more than 500,000 jobs since 2012, representing an overall growth in employment of > 30%.