Everyone is waiting for the downturn in the economy, and subsequently the freight market. Like a kid who knows they are eventually going to get punished for throwing a party while their parents were out of town for the weekend, history has trained us to think that all good things must come to an end with punitive effects.
After a long run of success, it is natural for anyone over age 10 to ask, when is the ball going to drop. Many of us that have been involved in trucking have a tendency to take any single negative indicator as a sign of the beginning of the end for the growth cycle. Eventually, we will be right, but is that happening now? The latest sign we see is volume dropping in the first week of October. Looking closer, you will see this is part of a natural behavioral pattern that we can predict pretty easily with the right data.
At the end of September, the index was at 10105 (anything above 10,000 means that the trucking volumes have increased above their March 1, 2018 number). As of Friday, October 5th, the index was sitting at 9434, a 6% drop from the end of the third quarter.
Over the course of the year there are many seasonal movements and patterns in freight. One of the most regular we can count on is the end of month and end of quarter shipping surge and the subsequent drop in volume at the start of the quarter. Shippers and transportation companies alike make attempts to push as much recognizable revenue into every financial reporting period they can to show as much value as possible. The problem in pushing everything off their dock at once is that they have now handicapped the following period with a deficiency of freight and therefore recognizable revenue, but less obvious is the impact on capacity.
Looking at the outbound tender volume chart for the year we can see this phenomenon illustrated clearly at the beginning of April and October. The drop-off in July is disguised by the fourth of July holiday and peaking summer volume.
Read the full article from FreightWaves here.