Nascent Freight Bull Market Marches On; Volumes Cool Slightly From Last Week's Pace

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Outbound tender volumes (OTVI.USA) rose by 4.93% year-over-year this week, cooling off a touch compared to last week’s year-to-date high of 6.78%. This continues their upward trajectory and extends their multi-week winning streak dating back to late July, when OTVI first crossed over to positive on July 24. It has been positive on a year-over-year basis since. 

Nationally, outbound tender volumes were up 4.93% year-over-year this week. Month-over-month volumes are tracking down 5.06% and week-over-week volumes slipped 70 basis points (bps). Overall, the volume picture remains quite solid.

Our prediction from last week is already coming to fruition. We noted, “Our optimism is tempered with one caveat: volumes fell off sharply in early October last year, meaning the current 6.78% year-over-year run rate is at least partially artificially inflated due to easy comparisons. We would expect volumes to continue to increase on a year-over-year basis through the end of the year – and definitely stay positive – but at a more measured pace than almost 7%.” Nonetheless, this is an expected small setback and does not dent the emerging bull case on freight in our view. We think this week’s 4.93% year-over-year volume growth is getting closer to what we view as the new sustainable, ongoing run-rate in the positive low-single-digit to mid-single-digit range.

On a market-by-market basis,11 out of the 15 major markets FreightWaves tracks were positive on a week-over-week basis, a significant improvement relative to recent weeks. On the upside, Miami led the way, up 16.8%, followed by Seattle, up 9.7%, and Los Angeles, up 4.8%. Detroit volumes continue to be hammered by the UAW strike, though they are showing some signs of stabilizing, falling 25.0% year-over-year and rising 3.0% week-over-week. On the downside, the worst markets week-over-week included Savannah (down 18.2%), Fresno (down 5.7%) and Memphis (down 2.7%).



National Rejection Rates Fall This Week, Uptrend Intact

National tender rejections now sit at 5.01%. The tender rejection story is not nearly as compelling as the volume story, likely a reflection of stubbornly high capacity in the market. Relative to the lows earlier this year, we do view trends in tender rejections as encouraging though.

OTRI.USA briefly broke above the 6% level for the first time since March back on September 17 but has since taken a noticeable step back. On a week-over-week basis, OTRI.USA fell by 30 bps. Month-over-month, it is up 15 bps and year-over-year it is down 989 bps compared to 14.9% at this time last year. On a trending basis, OTRI.USA looks solid, having risen in seven out of the last 10 weeks with tender rejections rising off of the 3.75% bottom experienced in mid-August. National tender rejections are 3.5% above their 60-day moving average.

Year-over-year comparables for national rejection rates are still extraordinarily difficult due to the daunting 2018 numbers in which rejections never fell below double digits. As a result, on a year-over-year percentage basis, OTRI.USA is down 66.4%. As can be seen in the chart below, comparisons do not start to ease until the January and February timeframe in 2020.


Image Sourced from Google