ACT Research released the September installment of the ACT Freight Forecast, U.S. Rate and Volume Outlook report covering the truckload, intermodal, LTL and last mile sectors.
For the past few months, ACT says it has been expecting pre-tariff shipping to ramp up ahead of the List 4 tariffs, and it says this month’s report presents evidence that inventory building is the main factor behind the recent uptick in freight.
ACT Research maintains its view that truckload and intermodal contract rates will fall this year, due to overcapacity and weak freight demand, while LTL pricing will stay positive.
Tim Denoyer, ACT Research’s vice president and senior analyst, said, “We now expect another soft patch in freight when the current inventory build turns to a draw, likely this winter after tariffs are imposed. This is similar to the dynamic of last year, but the main difference is that capacity has loosened materially. Truck sales have not softened yet, and amid ongoing excess capacity, this will hurt truckers’ negotiating position just as discussions begin for next year’s bid season.”
U.S. Class 8 tractor order intake was down about 90% y/y in July and August, off-record year-ago levels, but OEMs still have not meaningfully lowered production rates and new truck inventories are at all-time highs, ACT says. While backlogs are quickly thinning, carriers are still spending aggressively and adding to capacity.
Denoyer concluded, “We remain very concerned about a variety of adverse economic consequences of US trade policy, from the inverted yield curve to the industrial downturn to lower confidence and elevated uncertainty, not just inventory swings. While recession is still not our base case, risks are heightened.”
The ACT Truckload Rate Gauge improved this month on better freight volume, though it still favors shippers with a -3 reading. The coming decline in U.S. Class 8 tractor build rates should begin to bring the supply side a little more into balance, but inventory distortions are expected to become a headwind for freight in early 2020, pushing the gauge back to -6.