Pickett Research, LLC

With May and most of June now in the books, we find ourselves roughly where we started the year coming out of January – with a Q2 US TL Spot Linehaul Index print within 2% of equilibrium and accelerating. While January posted a preliminary Q1 print of -1.1% Y/Y before turning over and fading back to -6.7% to close the quarter, we believe our current Q2 mark of -1.8% is going to have a little more staying power. That said, with less than two weeks to go in the quarter, we don’t expect to close the quarter Y/Y inflationary as forecasted at +5.0% +- 5.0%. So we are pushing our forecast line ahead once again and now expect to finally break inflationary in Q3, after 9 long quarters of deflationary correction, to kick off the next 3-4 year TL rate cycle. And given the tepid action observed in industrial activity so far this year, coupled with weak Q1 Durable Goods Consumption data, we are taking our forecasted inflationary peaks down 10 pps to +40.0% Y/Y in Spot (Q2 2025) and 5 pps to +10% Y/Y in Contract (Q3 2025). Though we are keeping the projected cycle duration unchanged at 14 quarters, as compared to the current cycle’s 16 quarter expected run. So in summary, our revised Q2 2024 Spot Linehaul Index is now sitting at -1.8% Y/Y vs. a forecast of +5.0% Y/Y +- 5.0% and a revised forecast of -1.5% Y/Y. And our Contract Linehaul Index (Cass) is at -2.3% Y/Y vs. a forecast of -3.0%. And we now project a +5-10% sequential Spot Linehaul Index move in Q3 from our current position and a +20-30% move by the end of the year given the revision forward by a quarter. The May macro picture came in mixed once again, though remains mostly constructive. Q1 Consumption revised slightly lower to +2.3% Y/Y vs. +2.4% last month. And beneath the surface we saw another revision lower for Q1 durable goods consumption – down to +1.3% Y/Y vs. +2.0% last month and +5.8% in the prior quarter. If that trajectory holds going forward, we expect any meaningful recovery in industrial activity to struggle with regard to timing and magnitude. That said, we did see a +0.9% sequential improvement in Industrial Production in May taking the revised Q2 read to just barely inflationary at +0.1% Y/Y. The Inventory to Sales ratio opened Q2 flat at 1.37 where it has been stuck since Q4 2023. So despite the recent softness in goods consumption and signal of a slowing economy overall, we still see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. But while, in our estimate, the rate of capacity flight is enough to get the inflationary leg of the next Spot TL rate cycle going, we are going to need to see a meaningful improvement in industrial activity in the next few quarters to drive the market to +30-40% Y/Y as in past cycles. All that and more in this May 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy

After February’s Saint Valentine’s Day [TL Spot Market] Massacre took our Spot Linehaul index down 11 cents to $1.67/mi, our index slid another 6 cents in March to a current cycle low of $1.61 and remained there through April and now halfway through May. This made for a final Q1 2024 mark of -6.1% Y/Y vs. a revised forecast of -5.0% and a preliminary Q2 mark of -5.3% Y/Y vs. a forecast of +5.0%. That said, spot rates did start to grind higher the week before CVSA International Roadcheck week, a trend that we expect to continue through the end of the quarter. We don’t believe we’ll close the entire gap to Q2 forecast, but think there’s a good chance we close the quarter at least +5% higher from here to break Y/Y inflationary for the first time since Q1 2022. The Contract (Cass) Linehaul Index closed Q1 slightly higher at -5.3% Y/Y vs. a forecast of -5.0% so right on track there. Our forecast line continues to project -3.0% Y/Y in Q2 before breaking Y/Y inflationary in Q3 and going on to surge higher through the end of the year and into 2025. So despite increasingly challenging market conditions, asset-based motor carriers have continued to find a way to operate while taking spot rates lower and lower. But we believe the end is near for enough of them to begin driving spot linehaul rates higher going forward with a gradually improving TL capacity demand picture acting as a secondary catalyst as we kick off the next 3-4 year TL rate cycle in the coming months. That said, the macro picture at this moment in time remains mixed though is constructive overall. The preliminary read on Q1 2024 Consumption remained healthy at +2.4% (vs. +2.7% in Q4 2023) but beneath the surface we saw a material slowdown in durable goods consumption – down to +2.0% Y/Y vs. +5.8% in the prior quarter. But we’ll be watching closely through subsequent revisions to see where we ultimately land before drawing too many conclusions about the state of the Consumer. Industrial Production closed the quarter flat to last month at -0.3% Y/Y and relative inventory levels improved slightly as the inventory-to-sales ratio revised down to 1.38 from last month’s 1.39 (vs. last quarter’s 1.37). So while signals continue to contradict and confound from month to month, we still see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. So on to May we go. We unpack it all in this April 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement

Congratulations to Ryan Soskin David Tsai Nick Boston Paige LaNasa and all of our friends at GoodShip on their recently announced Series A. The momentum is building and the timing couldn't be better. As the US truckload market cycle flips Y/Y inflationary in the quarters ahead for the first time since 2020 (as we'll continue to highlight in upcoming issues of The Pickett Line), the supply chains that can adapt the quickest and most effectively will outperform their slower-moving competitors. But you can't change what you can't see. The GoodShip platform enables both, finally addressing the blind spot that exists between most enterprise procurement and TMS applications. Identify. Act. Evaluate. Repeat. Huge milestone GoodShip team. Onward.

After February’s Saint Valentine’s Day [TL Spot Market] Massacre took our Spot Linehaul index down 12 cents to $1.66/mi, the index slid another 5 cents in March to a current cycle low of $1.61 and remains flat now almost halfway through April. This made for a final Q1 2024 mark of -6.1% Y/Y vs. a revised forecast of -5.0%. The Contract (Cass) Linehaul Index revised slightly higher to -5.4% Y/Y vs. a forecast of -5.0%. So despite increasingly challenging market conditions, motor carriers are somehow finding a way to operate while taking spot rates lower and lower. Though we believe the turn is coming soon as unprofitable operators continue to exit the market (including some larger fleets more recently), diesel prices begin to march higher, and seasonal demand patterns return. Preliminary Q2 2024 retail diesel prices broke Y/Y inflationary for the first time since Q1 2023 at +2.3% with WTI crude oil trends signaling further increases ahead. And a revised Q1 2024 Cass Shipments (Demand) Index is so far showing a strong rebound off of the Q4 2023 deflationary bottom – recovering from -8.6% to -6.2% Y/Y. Should these trends hold in the months ahead, with both diesel and TL capacity demand pointing up and to the right for the first time since late 2020, then we should expect Spot TL rates to follow suit just as in past cycles. So while Q2 2024 has gotten off to a fairly tepid start, with our Spot TL Linehaul Index currently sitting at -4.1%, we continue to project the spot market to break Y/Y inflationary this quarter with a forecast of +5.0% Y/Y before running increasingly higher through the end of the year and putting this current freight recession of historic proportions finally behind us…for now. This would equate to a +8.7% sequential rise from current levels. Contract rates likely correct slightly higher but remain Y/Y deflationary at -3.0% in Q2, before following spot rates higher over the back half of 2024 and into 2025. The macro picture was mixed, though constructive overall. Consumption levels remain strong while Industrial Production and relative Inventory Levels continue to show weakness. So we’ll be watching these relationships closely in the months ahead as we look to build conviction around the overall direction of the economy and the demand-side forces that help drive the TL Linehaul rate cycle. But overall, we continue to see nothing that leads us to believe that anything is fundamentally different this time around that would materially change the shape of the rate curve going forward. Though We’ll find out soon enough. All that and more in this March 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement

Well, that escalated quickly. The big news last month was the steep decline in spot market TL rates. After four months of steadily increasing Spot TL Linehaul rates as the index bounced off its deflationary cycle inflection point last Q1 2023, February brought a 12-cent (-6.5%) retreat back to a blended 1.66/mile. In fact, the drop was so violent – even considering the market softness that typically comes with the 2nd month of the year – that we’ve dubbed February The Saint Valentine’s Day [TL spot market] Massacre.   Was it the last gasp of an increasingly exhausted supply base now running on fumes? Or something more structural and therefore permanent in nature? Given the rest of our macro and micro market indicators, at this point we believe the former. But regardless, given the magnitude of the move and the impact it had on the Q1 2024 US TL Spot Linehaul Index, we no longer project the spot market to break Y/Y inflationary as previously expected and have shifted both the Spot and the Contract forecast lines forward by a quarter.   That said, the Q1 Spot Index revised from -1.1% Y/Y in January down to -6.1% Y/Y vs. a revised forecast of -5.0% and compared to the previous quarter’s -9.8%. So still pointing up and to the right toward inflation land, but we’re no longer knocking on the door as reported last month. The revised forecast now shows us breaking inflationary next quarter at +5.0% Y/Y and running +30-40% higher by the end of the year, but not peaking until Q2 2025.   Given the historical relationship between the contract and spot markets, we’ve shifted our US Contract TL Linehaul rate (Cass) forecast line forward by a quarter as well to continue to trail the spot line.   After declining -15.5% from September 2023 to January 2024, retail diesel prices turned +4.9% higher to close back above $4/gal at $4.044. They remain stable in March MTD. So it wasn’t falling diesel prices that allowed the supply side to take spot rates lower in February.   Just about every other macro indicator posted or revised higher last month. Q4 2023 Consumption revised higher to +2.7% Y/Y, Industrial Production inched 10 bps higher to open Q1 2024 flat at 0.0% Y/Y, and the Q4 Inventory to Sales ratio held flat close the quarter at 1.37 – all generally constructive signs for the US economy, future industrial activity, and therefore the demand side of the truckload market equation.   So coming into March, the question will be whether February was a short-term deflationary anomaly or signal that the supply surplus that clearly still remains in the market is going to be more resilient and much slower to exit than in past cycles. But with spot rates tanking ~7% while diesel prices rose ~5% in February, perhaps this month will be the real test. We unpack it all in the latest February 2024 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement

Welcome to a new month, a new quarter, a new year...and what we expect to mark the beginning of a new US TL Linehaul Rate Cycle. We’ve got a lot to dig into this month with our first glimpse at Q4 2023 GDP, Consumption, and Imports and a final revision on our Q4 US TL Contract Linehaul Index – in addition to our usual roster of macro and market indicators. But first thing’s first, let’s start with our rate indices. With Q4 2023 now closed at -9.8% Y/Y vs. a forecast of -5.0% Y/Y +- 5.0%, our preliminary Q1 2024 US TL Spot Linehaul Index exited January at -1.1% Y/Y vs. a forecast of +5.0% Y/Y +- 5.0%. We haven’t broken through our x-axis just yet to run Y/Y inflationary for the first time since Q1 2022, but the market is knocking on the door. No doubt at least some of January’s spot rate inflation was driven by especially disruptive winter weather, so we expect a slight pullback (~5-10 cents) in the short term, but we believe that was only part of the story. In recognition of this expected near term volatility, the theme this month is ‘Two steps forward, one step back.’ To close Q1 on forecast, we’ll need another 6% climb from the January close by the end of March – which we think is entirely reasonable. From there, we continue to project TL Spot Linehaul rates to run +30-40% higher by the end of 2024 which at this moment in time stands in stark contrast with most of the other 2024 market forecasts we’ve seen that are mostly calling for a flat to even slightly down rate and volume environment. Regardless, we’ll all find out soon enough. With the December revision, our Q4 2023 US TL Contract Linehaul (Cass) Index closed just inside our forecast line at -7.3% Y/Y vs. -7.5% - so we continue to run right on schedule there. Our Q1 2024 forecast edges slightly higher to -3.0% Y/Y before breaking Y/Y inflationary in Q2 to follow TL spot rates. And with the preliminary Q4 2023 Consumption print, we got further signal that the economy is strengthening with a mark of +2.6% Y/Y vs. Q3’s +2.2%. Historically, this one tends to be one of our more reliable recession indicators. And so long as the slope points up and to the right, the economy tends to be in pretty good shape in subsequent quarters. That doesn’t mean 2024 can’t be the exception to the rule, but with the exception of Industrial Production (revised to -0.2% Y/Y to close Q4), just about all of our macro indicators have been flashing constructive signals in recent months. We unpack all that and more in the latest January 2024 issue of the Pickett Line. Here's the excerpt, but as usual, all of the really good stuff (like the charts themselves) can only be accessed in the full issue. Subscription details can be found at pickettresearch dot com. #freightrates  #trucking  #supplychain  #freight  #economy  #procurement

Well folks, we made it through another wild year in the US trucking market. We hope everyone had a great holiday season, closed Q4 strong and is well positioned for what comes next in this new month, quarter, and year. With the final revisions in for Q3 2023 Consumption, GDP, and Imports this month, we find that all of the preliminary trends held up. Consumption settled at +2.2% Y/Y, thus maintaining its bullish trajectory and pointing away from a near-term recession not towards it. And Imports revised slightly higher to -1.7% Y/Y, confirming its Q2 deflationary inflection point and representing another positive signal for the US economy going forward. Industrial Production remains flat to the last few months but did deteriorate slightly by 10 bps for a revised Q4 print of -0.1% Y/Y. And the Inventory to Sales ratio set a preliminary Q4 mark of 1.37, also flat to last quarter. From here, it will be all eyes on the preliminary Q4 Consumption print due out at the end of the month as well as the final revision on Q4 IP as our next signals regarding the road ahead of us. But as it stands, all looks relatively promising and in full support of the soft landing narrative that the market herd has started to re-align around. Our Q4 US TL Spot Linehaul Index closed at -9.8% Y/Y vs. a forecast of -5.0% Y/Y + 5.0%, same as last month. So no late-quarter fireworks to spice things up this year. And the very preliminary Q1 2024 read is showing a -2.2% Y/Y vs. a forecast of +5.0% + 5.0%. Our Q4 US TL Contract (Cass) Linehaul Index revised slightly lower to -7.4% Y/Y vs. a forecast of -7.5% so with one more revision to go, we are running right on schedule there. Diesel continued to fade lower with December closing -6.6% lower than November, and preliminary January showing another -2.4% decline. Over the next couple of months, we believe it will be diesel prices that dictate the pace of carrier exits that will ultimately determine the path of Spot market linehaul rates, so we’ll be watching this one closely. All that and more in the latest December 2023 issue of The Pickett Line. For those looking to go deeper into the freight market rabbit hole, you can find subscription details at pickettresearch dot com. Until then, here's the excerpt...

Aside from a flat print on Industrial Production and a relatively weak preliminary read on the Q4 ATA TL Volume Index, every one of our macro and market indicators put up a constructive number this month. With early December now baked in at this point, our US TL Spot Linehaul Index has now revised within -10.0% Y/Y and sits at -9.8% Y/Y vs. a forecast of -5.0% + 5.0%. In the meantime, our preliminary TL Contract Linehaul (Cass) Index has snapped back to our forecast line with at -7.3% Y/Y vs. a projection of -7.5%. At this point, we expect our Spot Index to close the quarter at -8.0-9.0% Y/Y and maintain current guidance to break Y/Y inflationary in Q1 and to run +30-40% higher over the course of 2024. And for the Contract Index to trail by a quarter or two to break inflationary over the back half of next year. So conditions remain relatively stable as compared to last month with the TL markets still poised to break Y/Y inflationary in 2024 to kick off the next 3-4 year US TL Spot Linehaul Rate cycle. The only real question that remains is that of timing, which we believe is going to be driven by what diesel prices do over the coming weeks and months. We break it all down in this special November 2023 holiday issue of The Pickett Line. Here's the excerpt, which includes the traditional Pickett Research holiday poem... ‘Twas the late stage of the cycle, and all through the land, Rate increases were scarce, suppliers all told to pound sand.    But how can this be? The market’s been brutal all year. As spot and contract rates drift lower, profits soon disappear. Then as more carriers and more brokers all take it on the chin, RIFs are splashed across Freightwaves and celebrated by the trolls on LinkedIn.   Though like it or not, these are normal forces at play. What the market cycle shall giveth, it shall taketh away. But do not despair, brighter skies lie ahead. For those still in the market and hanging, even if only by a thread. So how long must we wait, for these dark clouds to part? As we unpack November, we’ll assess chart by chart.   Then using data as our map, and history as our guide, We’ll see that there’s reason for cheer in the new year, As markets finally recover and begin to hit stride. 

Has the spot market bottomed out? Will longer term contracts make a comeback? Are we headed toward the next recession or does consumer spending tell a different story? Join us December 7th at 11am PT for a joint webinar and Q&A with Nick Boston from GoodShip and our very own freight market expert Chris Pickett (COO of Flock Freight, Founder of Pickett Research, LLC) as we peer into the crystal ball to see what the next year in freight might have in store for us. In this special 45-minute session, Chris will dive into his truckload market forecast, discuss the ways shippers can prepare and position their network for success, and answer your most critical strategic questions about navigating 2024. Register via the link in the comments to attend live and for access to an on-demand recording after the event 👇 #freighttech #freightrates #supplychain #webinar #marketupdate

As all-in spot TL rates remained mostly flat over yet another month, we’re seeing further evidence that while it is likely that a sequential bottom has been reached, a catalyst has yet to arrive to trigger the beginning of the recovery higher. Though with the most constructive macro picture we've seen this year to report this month and news of more and more capacity (both asset-based and non asset-based) exiting the market in recent weeks, we might not have to wait too much longer – assuming the macro holds up. So our current guidance remains unchanged – that Spot TL linehaul rates break Y/Y inflationary as early as Q1 2024 and Contract rates follow one to two quarters later. But to get there, we’ll need to close a double-digit gap with our preliminary Q4 Spot TL Linehaul Index coming in at -12.0% Y/Y vs. a forecast of -5.0% + 5% and the Q3 Contract TL (Cass) Linehaul Index closing flat to last month at -11.2% Y/Y vs. a forecast of -9.0% Y/Y. In the meantime, both Consumption and Industrial Production are both pointing higher Y/Y for the first time since the COVID-induced boom of 2020-21 and the Inventory to Sales ratio is finally showing signs of a local top. And while diesel prices took a breather this month, cooling by 4 cents/gal vs. September, they look poised to continue their steady march higher in the months ahead. So with the TL market remaining so far in a seemingly precarious balance from a rate perspective in recent months, given the short-term signals in demand and diesel, we could very easily get some volatility around the holidays as this peak retail season runs its course – as underwhelming as it might prove to be. So hang in there everyone. While the market environment continues to feel pretty lousy if you’re on the supply side, despite perhaps the magnitude of the supply overshoot during the inflationary leg of this cycle compared to cycles past, we have seen nothing that suggests market dynamics have fundamentally changed or that this cycle won’t ultimately function like those before it. Or that this capacity shakeout won’t fuel the next recovery in 2024. You just gotta survive to be there for it. We unpack it all in this October 2023 issue of The Pickett Line. Here's the excerpt... #freightrates #trucking #supplychain #freight #economy #procurement