No wonder freight rates are down

[carolina trucker]

I spend more time fretting about the stock market than I should, I guess, especially since there's nothing I can do that's going to change what happens on Wall Street.

However, now and then when I'm looking at news about the economy I run across stuff directly related to our line of work. This is one of them.

For those of you who may not have heard this elsewhere, freight shipments in February 2007 were down by about 1.7% compared to February of last year. That doesn't sound like much, but with more trucks on the road, it helps to explain why rates are softening.

Here's the article:

Recent data from the Chicago Fed to home prices to retail sales and jobs data have all pointed to the long-awaited slowdown in consumer spending. The latest sign comes courtesy of the people who move the goods from manufacturer to retailer and, ultimately, consumer.

Trucking Shipments Drop by 1.7 Percent

U.S. trucking shipments declined by 1.7 percent in February compared with a year earlier, an industry trade group said. The American Trucking Associations, in a monthly report released Monday, said shipments have declined on a year-over-year basis for eight straight months. Its truck tonnage index rose 1.6 percent from January, however.

Because more than two-thirds of all manufactured and retail goods in the U.S. are carried by truck, the industry is considered an important economic bellwether.

And, since two thirds of the economy is consumer-related, the trucking business also offers a window into consumer spending habits.

The slowdown in trucking could easily have been anticipated, given the data points mentioned above, along with the earnings warning from FedEx (FDX) and weaker pricing for corrugated boxes. One reason to watch so many different indicators is to be able to spot when a given data point should be given extra attention or ignored based on whether it supports everything else that is known.

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Just passing it along FWIW.

-- c t

[Mountain Flyer]

Thanks for the post. It was slow last year, and it is this year, IMO.

[allan5oh]

Is it just me or do the smaller guys get affected by rates earlier/more than the big companies?

For example, the past half-year or so, I've only hauled regular customers. Maybe my company has a contract with them that locks in the rate.

[Ian Williams]

Part of the lower rates are that a lot of carriers bought every pre 07 emissions tractor they could get their hands on.

Construction is slowing is many of the previously hot markets in the coastal blue states. Many construction workers have a CDL as their "plan B".

It also has to do with what sectors of the ecomony are hot. Some like construction require a lot more freight per unit of value than others. Building a house from the foundation up generates all sorts of freight demand; from the lowboy for the earth moving equipment, 10 wheel cement trucks for the pad, flatbeds for the lumber & drywall, vans for the paint and interior bits etc etc etc..

Contrast this with some buying a new I-Pod. The package is perhaps 1/100 of a cubic foot in a van and all the songs are purchased (I'm ignoring napster and the like here) via internet.

I'm lucky in that my LTL barn is ~40% busier compared to the same time last year. OT has been flowing freely for the past month of so. I know we had to cut our rates a bit to gain some business.

Ian

[silvan]

Is it just me or do the smaller guys get affected by rates earlier/more than the big companies?

Since I lost my job of 10 years in January, I'd say it ain't just you.

[Dejanh]

Am in LA now and DAT shown 331 loads and 1600 trucks waiting to go to Midwest. DAT also calculates the average rate that should be charged and its 1.19cpm.....Whats pulling me through is LTL which is down as well..am here second day. I am really getting tired of van freight..

[GMAN]

I am seeing rates go up somewhat. It will differ according to where you run. I have one shipper who has been down, but is beginning to pick up a bit. Just because a low rate is offered doesn't mean that you need to accept it. Rates will stay low in some areas because the brokers know owner operators will haul it for fuel money. I have a minimum haul rate. I a broker or shipper is unwilling to pay at least my minimum, I move on. If I think I can get something better by waiting a day, then I may hang around. Otherwise, I put my truck in the wind to a better paying area. Rates are about supply and demand. If there are more trucks who are willing to haul for cheap rates, then it makes good business sense for the broker or shipper to only pay a low rate. If more refuse to haul the cheap rates, then they go up. You can blame cheap rates on brokers and shippers all you want, but the real problem is with the carriers and owner operators who are williing to compromise and haul for next to nothing.

[Mountain Flyer]

Amen to that Gman. There are about 250 loads right now within 15 miles of my house, if you will haul for a buck a mile. I won't. 8)

[GMAN]

Mountain Flyer, I have two of my better shippers who are about 2 hours from where I park my trucks. I would prefer driving the 2 hours for a really decent paying load than 10 miles for a rate which is substandard. It can take time to find shippers and/or brokers who have decent paying consistent loads. You just have to keep plugging away until you find what will work for you.

[BanditsCousin]

HHG is projected to be a so/so year with housing slowing down and economic conditions

But I run for an agent with a lot of accounts, so hopefully bandit will survive

[Dejanh]

There are couple of reasons why rates are down currently and one of the big ones, in the dry van buisiness atleast is CA freeze that trashed about a billion dollars of citrus and left reefers pretty much stuck with only option to load is to haul dry freight out, rates got hit badly and will be down untill new stuff grows, lettuce or whatnot...
Other is Real Estate market which is draggin as as we speak but is expectet to stabilize over the next few months.
freight was down 1.7% in feb. of this year compared to the FEB of last year....

Texas is one more reason as it fell of the map in the last six months and brokers in CA tell me that there is an issue with ports thats stopping some freight to get inland, i dont really know the detail but have heard it even from Churchil..

Was listening to Bloomberg radio this morning and the projections for economic growth look weak in the first two quarters with other two looking promising so from july and up we should see freight rates moving steady which is no new to me as from about July thru Dec. i do my best work.......

[Rev.Vassago]

HHG is projected to be a so/so year with housing slowing down and economic conditions

But I run for an agent with a lot of accounts, so hopefully bandit will survive

My accounts are better than your accounts. :P :P :P