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Home » Freight prices surged in October amid higher demand, rising fuel, hurricanes, index finds
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Freight prices surged in October amid higher demand, rising fuel, hurricanes, index finds

November 28, 2017
DC Velocity Staff
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A monthly index that tracks shipments and expenditures reported today that the cost of moving freight surged last month to the index's second-highest percentage gain in the past five years, another sign freight costs are moving inexorably higher heading into the holidays.

The index, published by audit and payment firm Cass Information Systems Inc. and investment firm Broughton Capital, said that freight expenditures, which cover all forms of spending, jumped by 11.3 percent over the same period a year ago—a 3.9-percent increase from September levels. Only in June 2014 has the expenditures sub-index been able to show a higher year-over-year percentage gain in the past five years, the report said.

Shipment growth rose over the same periods, but nowhere near that of spending, an indication that rates are racing ahead of shipment growth. Separately, DAT Solutions LLC, a consultancy that tracks pricing on the truckload non-contract, or spot, market, reported three-year highs in spot rates for refrigerated transport during the holiday-shortened week. Dry van spot rates hit $2.07 per mile last week, very near all-time highs, DAT said.

The year-over-year gains shown in the Cass-Broughton index reflect demand weakness in October 2016 due to uncertainty over the upcoming presidential election, and the lingering effects of the 2014-15 industrial recession, which depressed freight rates. In retrospect, October 2016 would prove to be the bottom of the current pricing cycle, according to Donald Broughton, a long-time transport analyst and head of the firm that bears his name.

The current pricing environment reflects increasing demand for parcel, air, trucking, and to a lesser extent, rail services, according to the report. It also incorporates higher diesel and jet fuel prices that correspond with the yearlong increase in oil prices, as well as the impact of hurricanes Harvey and Irma, which drove up spot truckload rates first as capacity was diverted to the affected areas and away from other parts of the country, and then as trucks were needed to aid in the recovery and rebuilding efforts in Texas and Florida, according to the report.

Underscoring the current strength in freight rates, the report said the 2014 increases came amid significantly higher fuel prices than those that exist today. Thus, the current rate climate has less of a tailwind from fuel than it did three years ago, according to the report.

Transportation Air Trucking Rail Truckload Less-than-Truckload Parcel & Postal Carriers
KEYWORDS Broughton Capital Cass Information Systems DAT
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