North American commercial vehicle market metrics are showing positive results, even as other areas of the economy continue to suffer from pandemic-related economic impacts, according to a report from industry analysis firm ACT Research.
One major factor that has pushed significantly better freight outcomes is a change in consumer behavior, the Columbus, Indiana-based firm said. As many shoppers have stopped commuting to schools and offices, they have shifted from spending on experiences—such as restaurant meals and movie theaters—to spending on physical goods that in turn create rising freight demand.
“Consumer spending on durable goods in July was 10.5% higher than it was in January. Over the same period, spending on services fell 9.7%. On the supply side of the equation, considerable sidelined driver capacity has constrained the trucking industry’s ability to haul freight,” Kenny Vieth, ACT’s president and senior analyst, said in a release. “The current imbalance between freight demand and driver supply pushed dry van spot freight rates to all-time highs in August, a key barometer for new equipment demand.”
Despite that positive environment, one variable offsetting the trend is considerable parked heavy truck capacity that will eventually return to the market, leading ACT to forecast a “steady, rather than robust” Class 8 market rebound into the first half of 2021.
The report supports an August finding by ACT that freight markets are withstanding the financial impact of the pandemic better than the economy at large, which will require the discovery of a Covid-19 vaccine to sustain a more broad-based recovery.
“While Covid has triggered the most severe recession since the Great Depression, economic activity has been on a solid recovery path since the April swoon,” Vieth said. “Despite that upward movement, some economic sectors remain mired in deep recession. The story for the transportation sector broadly and for heavy duty trucks specifically can be summed in two words: surprisingly strong.”
The results echo a finding from FTR Transportation Intelligence, another industry analyst firm, that its Trucking Conditions Index (TCI) for July was 2.84, down from the previous month’s 11.35 reading, but still favorable for carriers as the recovery continues. FTR now expects the TCI to stay in positive territory through the balance of the year and into 2021.
“The rebound we saw in June took a bit of a breather in July, but the surge yielded higher spot rates,” Avery Vise, vice president of trucking for FTR, said in a release. “Spot volumes and rates were stronger in August, and imbalance is at record levels. The near-term outlook remains favorable for carriers, but we could see some stabilization soon. Record low retail inventories relative to sales likely are a big driver of freight demand, and August employment data showed the first real signs that significant capacity is returning.”
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel price, and financing. Combined into a single index, the resulting number represents good, optimistic conditions when positive, and bad, pessimistic conditions when negative.
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