Shipping and Logistics
Freight Industry Looks Forward to Increased Shipping in 2020
Written by Sandy Williams
January 30, 2020
The U.S. Bank Freight Payment Index, a quarterly analysis of freight volumes and spending, fell 4.0 percent in the fourth quarter after gaining a total of 10 percent in the second and third quarters. Both volumes and spending dropped during the quarter due to weaker economic activity and impacts from the international trade market.
The Q4 slump in shipping was attributed to a decline in factory output as export demand weakened and investment spending paused due to trade uncertainty. A reduction in China imports and a slower economy caused an imbalance between shipping capacity and inventory, said the report. Trucking firms anticipating larger shipments led to higher truck purchasing that, with the economic slowdown, resulted in more supply than demand.
Fourth-quarter domestic freight spending fell 2.5 percent from the third quarter and 2.7 percent from Q4 2018, on lower contract rates and spot market pricing. With lower demand, shippers were able to ask for discounts on rates.
Spending overall in 2019 was up 3.4 percent from 2018 due to the strong second and third quarters.
“I think it’s remarkable that overall spend was up on a full-year basis for 2019,” said Bob Costello, senior vice president and chief economist for the American Trucking Associations. “It shows great resiliency given the challenging freight environment. Even though the U.S. economy is not in a recession, the factory sector is, and it’s absolutely impacting truck freight volumes and spending. But there are some bright spots. The U.S. has taken the first steps of an agreement with China, and spending is up in some parts of the U.S. due to a surge in construction activity.”
Bobby Holland, U.S. Bank vice president and director of freight data solutions, said the freight industry is “rebalancing” this year, but will benefit from an increase in housing starts and shipments.
“There’s a correction happening right now,” Holland told JOC.com. “2020 is expected to start slower but finish strong as activity picks up over the first and second quarter.”
The Phase 1 agreement with China is expected to lead to an upturn in manufacturing production.
“We’ve seen a rolling impact from threatened tariffs causing inventory to rise,” he said. “A lot of goods were pushed into Q3 and Q4 [2019]. As stocks bleed down in Q1 and Q2, we’ll see trucking activity pick up.”
Sandy Williams
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