Q2 2024 Truckload Market Forecast: Spot & Contract Freight Rate Trends
In our last quarterly update, the Coyote Curve® continued to climb out of the deepest trough in the index's history.
But the upwards shift back to inflation has been slow (painfully slow for carriers, thankfully slow for shippers).
The Q1 numbers are in.
Are rates still clawing their way higher? And is 2024 rate inflation still in the cards?
We'll tell you everything you need to know about the past quarter and what to expect throughout Q2 in the latest truckload market guide.
Q2 Truckload Market:
The Complete Guide for Logistics Pros
- Q1 Trucking Spot & Contract Rate Recap
- Economic Outlook: Indicators That Drive Freight Demand
- Trucking Trends Impacting the Market
- Q2 Truckload Market Forecast
- Download the Forecast Slides
New to the Coyote Curve?
These essential truckload market resources will give you foundational industry knowledge and teach you how how we build our proprietary spot rate index.
Q1 2024 Spot & Contract Trucking Rate Recap
In Q1, the Coyote Curve continued its climb towards inflation, in-line with our prediction.
Y/Y spot rates trended upwards for the fourth straight quarter; however, overall conditions remained relatively stable — neither shippers nor carriers likely noticed a significant impact to pricing and capacity.
While cold weather events across the country led to a strong January, the rest of the quarter remained relatively quiet.
Though the market seems stuck in the doldrums, it is climbing incrementally higher, getting dangerously close to flipping back to rate inflation and ending the longest truckload market cycle in the Coyote Curve's recorded history.
But it hasn't done so just yet.
Download all the forecast charts in slide format for your next presentation.
Q1 truckload spot rates continued heading towards inflation
Truckload spot rates finished Q1 at -3.3% Y/Y, up from -9.9% in Q4.
Q1 truckload contract rates have bounced off the bottom
Truckload contract rates* trended upwards to -5.3%, up from -7.3% Y/Y in Q4 2023.
Typically contract rates will lag spot rate activity by two to three quarters, but the turn happened faster in this cycle, lagging by only one quarter.
This was driven by record decreases in contract rates — there was just not any further down to go.
Actual Spot Truckload Rates vs. Y/Y
To build further confidence in the Coyote Curve (a Y/Y spot rate index), let's see it up against our proprietary all-in cost-per-mile index — this is comparing annual change versus the actual rate.
(As a reminder, these numbers are informed by real transactional data from thousands daily shipments spanning over 17 years.)
Download all the forecast charts in slide format for your next presentation.
After increasing sequentially in Q3 2023 for the first time in a year-and-a-half, our all-in index has remained flat for three quarters in a row.
Though the cost-per-mile index is also off the bottom, it's still only back to levels from the 2014 peak.
That means, in absolute terms, carriers are currently getting similar spot rates to nine years ago, though their operating costs (diesel, insurance, labor, etc.) have increased substantially.
Simply put, there is no room for rates to drop, as many carriers have been running at unsustainable levels.
The unstoppable force meets the immovable object
Why has the trough of this market dragged on for so long? It's the lasting effects of the COVID-era supply chain boom.
- Unstoppable force: After two years of record profits in 2021 and 2022, carriers have been able hang in the historically tough down market longer than usual.
- Immovable object: Shippers, after paying out historically high freight rates during that same time, continue to push rates back down.
Q1 2024 Truckload Market Recap
The Coyote Curve (measuring Y/Y change in spot rates) continued its upward climb for the fourth straight quarter, though all-in rates (actual amount paid to carriers) remained flat for the third straight quarter.
Signs continued to point upwards, and we are nearing an inflationary rate environment, but we are still in a shippers' market.
Carriers remained under significant cost pressure, while shippers enjoyed high tender acceptance, easy capacity and another round of rate decreases in their annual RFPs.
Key Economic Indicators Driving the Truckload Market
Since 2023, the burning question has been, "Is the U.S. economy going to tip into a recession, or will we have a soft landing?"
The first full quarter of 2024 is in the books, and while the economy isn't roaring back, the base case still seems to be a soft landing.
Freight markets, on the other hand, have been a different story; in terms of overall shipping volume, we are still in a recessionary period.
It's worth noting that though the truckload market is linked to what happens in the wider economy, it is not always coupled (see the inflationary Curve in 2008 during the Great Recession).
Given how supply and demand work in the truckload market, it's possible for the economy to remain strong and the truckload market to languish (and vice versa).
Let's examine the most recent available figures for industrial production, consumer spending, imports and inventories through the lens of how they are impacting truckload shipping.
Download all the forecast charts in slide format for your next presentation.
Personal Consumption Expenditures
- What is it?
How much the American consumer is spending - How it impacts truckload shipping:
The more we buy, the more we need to produce (IP) and/or buy elsewhere (imports), which translates to greater demand for truckload shipping.
Throughout persistent inflation and fears over a possible recession, consumer spending has remained stable, helping to buoy the overall economy.
Though the rate of growth has steadily slowed since Q4 2021, it is still growing — through February of 2024, PCE is at 4.8%, remaining virtually flat from Q4.
Industrial Production (IP)
- What is it?
Total value of physical goods America is producing - How it impacts truckload shipping:
The more we make, the more freight that needs to move, from raw material inputs to finished goods
Though IP, like consumer spending, has trended downwards for several quarters, it is still stable. Through February 2024, the index sits at -0.3% Y/Y, remaining virtually flat since Q2 of last year.
While we don't anticipate a large uptick in production (that would increase overall truckload volumes), as long as it remains stable, demand won't likely get any worse either.
Imports (Goods Only)
- What is it?
Total value of physical goods America is buying from other countries - How it impacts truckload shipping:
The more we buy from other countries, the more freight that needs to move, from raw material inputs to finished goods
With chaos in international shipping markets over the past four years, this indicator has been particularly volatile.
After hitting a high of 31.9% in 2021, imports (of goods, excluding services) ended Q3 at -0.9% Y/Y, and trended back into Y/Y positive territory in Q4, ending at 0.5%.
Inventory-to-Sales
- What is it?
The ratio of physical goods businesses have in stock vs. how much they're selling - How it impacts truckload shipping:
When inventory levels are high, it creates a delay in demand for truckload shipping, as businesses will work off excess inventory before producing new goods (IP) or buying more goods (imports).
After pandemic-related supply chain disruptions wrought havoc to shippers' inventories, many began to stockpile in an effort to combat volatility and meet demand.
Throughout 2023, many businesses tried to shed inventory amidst falling demand and rising interest costs.
After peaking at 1.40 in December 2022, the index has trended down slightly, staying between 1.36 and 1.39 for every month since then — through February (most recent available), the index is sitting at 1.39 Q1-to-date.
Now that the ratio has remained essentially flat for over a year, hovering around pre-pandemic levels, it suggests that destocking efforts were largely effective and inventory levels have normalized.
Macroeconomic Takeaway
Not much has changed since Q4 — all the major indices are essentially flat.Despite continued headwinds over the past year, the U.S. economy seems to have stubbornly avoided a recession.
Though we are still coming out of a freight recession, the truckload cycle will continue its course.
The last time the cycle went inflationary (2020 - 2021), incremental freight demand drove rate growth. For the upcoming inflationary leg, the macroeconomic outlook still doesn’t support a massive spike in demand.
Instead, supply-side constraints (carrier attrition) will be the driving force.
Truckload Market Trends to Watch in Q2
We have climbed out of the trough of the truckload market cycle and are very close to Y/Y inflation — we will almost certainly get there in Q2.
Let's unpack a few of the key trends impacting the market before we dive into the updated Q2 forecast.
1. Freight volumes are (still) lagging, but this spring is showing some green shoots.
Though we may not be in an economic recession, we are in a freight recession, at least in terms of truckload shipping volumes.
While shipping demand might not come roaring back this quarter, there are a few reasons to be hopeful conditions are improving.
- Both the Cass Shipment Index and ATA Truck Tonnage Index are showing Y/Y decreases, however, they picked up steam in Q1, getting closer to Y/Y inflation.
- The ISM Manufacturing PMI® registered 50.3% in March, up from the 47.8% in February, with the U.S. manufacturing sector moving into expansion for the first time since September 2022.
- According to the DAT in Q4, we saw load-to-truck ratio drop to its lowest level since Q2 2016. In Q1, it was up 13%, a hopeful sign of more shipments against a right-sizing carrier base.
2. Fuel prices are stable, but at a higher level.
Diesel has been on a ride over the past several years.
From 2015 to 2022, diesel, with a few exceptions, averaged between $2.50 and $3.50 / gallon.
In 2022, it ballooned up to $5.70, dropped to $3.80, shot up to $4.60, then dropped back down to right around $4.00, where it's been for the past few months.
Why does that matter?
Diesel fuel, which represents around 30% of a carrier’s overall cost, can have a huge impact on a trucking company's profitability if it rises or falls faster than freight rates.
Many carriers were able to absorb historically high fuel costs in 2022 due to historically high rates. That hasn't been the case for some time.
If fuel gets more expensive (e.g., if another geopolitical event to an oil-producing nation like we saw with the Russian invasion of Ukraine in 2022), we'll see a faster rise to inflation as carriers can no longer absorb the increase.
If it remains stable, expect a slower rise.
3. Carriers are buying less trucks.
In Q1, Class 8 tractor orders (as tracked by ACT Research) were down -18% on a Y/Y basis.
After remaining positive for six consecutive quarters (despite spot rates dropping for over a year), in Q4 2023, the bottom finally fell out, with orders dropping to -10.6% Y/Y.
Q1 2024 was another continuation of the trend, with orders dropping again to -18.0% Y/Y. This is another indicator showing the financial strain on the supply base — carriers have caught up to COVID-era backlogs, and the need for incremental capacity, or the ability to turn over old equipment, is lessening.
4. 2024 contract rates are now in-market.
Like in 2023, shippers used their 2024 transportation RFP as an opportunity to bring their contract rates (aka primary rates) back towards pre-pandemic levels.
Even though spot rates had already bounced off the bottom, most companies tried to get one last round of reductions.
Many of these bids took place during Q1, which means that the start of Q2 is the start of 2024 contract rates across the industry.
As these 2024 RFPs begin to set in, the spot market will finally become more lucrative than the contract market — we've already seen that in Y/Y terms, and will likely see it in absolute terms very soon.
As the two diverge further, it will create tension across routing guides as carriers look to move more drivers into the spot market. We'll see the shift from a shipper's market back to a carrier's market begin.
5. Carrier employment continues to wane.
Throughout most of 2023, and even into 2024, driver employment figures have remained curiously strong, despite weaker market conditions.
As freight volumes dropped, many drivers flocked to the security of larger fleets who were more exposed to lucrative contract freight.
As these drivers shifted from owner-operators (who don't show up in payroll data) to W2 employees at fleets, it boosted employment data from the Bureau of Labor Statistics (BLS) even though the actual amount of capacity in the market was either flat or down.
Though numbers are stronger than we'd expect to see after this much time in a down market, we are finally starting to see more attrition.
All Employees, Truck Transportation (from the BLS)
- Decreased sequentially in 7 of the last 12 months, and in every month of 2024
- Decreased Y/Y for the past 9 consecutive months
Production & Non-Supervisory Employees, Long-Distance Trucking (aka Drivers, from the BLS)
- Decreased sequentially in 6 of the last 12 months
- Decreased Y/Y for the past 9 consecutive months
Operating Authorities (from the FMCSA)
- There was a net decrease of over 5,700 operating authorities in Q1.
- This makes a total decrease of ~38,500 operating authorities over the past year and a half. For context, there were around 100,000 additions from 2020 to 2022. This two-year decline has been blunted by continued private fleet capacity growth and freight insourcing.
Truckload Trends Takeaway
Though freight volumes are sluggish, there are signs of carrier attrition in employment and authority revocations.
The speed and severity of the upward climb will depend on how fast carrier capacity exits the market, but after weak Q1 freight volumes, decreasing contract rates setting in, and relatively expensive fuel, it will likely speed up in Q2.
Q2 2024 Truckload Market Forecast
We've covered the macroeconomic environment, and key trends — but where does it leave us going forward?
Let's look at the latest forecast.
Download all the forecast charts in slide format for your next presentation
We predict the Coyote Curve will continue it’s move to the upside and finally cross the barrier, pushing the market back into Y/Y inflation. This will end the longest truckload market cycle in our recorded history and start the next.
Though capacity and rates might feel stable, we are in a changing environment.
We continue to see carrier capacity leave the market (albeit slowly), truckload rates are clawing higher, and stable consumer spending supports a rosier freight demand outlook later in 2024.
With 2024 bid rates now in effect (most of them lower) and spot rates trending higher, the divergence will drive volatility as cash-strapped carriers look to increase profitability after a very difficult 2023 (and early 2024).
All that said, while the index will certainly flip inflationary, we don't anticipate the sort of extreme conditions experienced in the last inflationary market in 2020 and 2021.
For guidance, a look back to 2017 would be a better comparison.
Forecast Takeaway
We continue to head back to an inflationary spot market, which we will hit in Q2.Contract rates will likely remain in Y/Y deflationary, and with most 2024 bids setting in, spot rates will overtake contract. This dynamic will create pressure for shippers later in the quarter.
While Q2 might not feel like a dramatically different operating environment, we are in a changing marketplace that is setting us up for a flip later in the year.
What Can You Do?
Don't be too aggressive in rate cutting.
Though tempting, be prudent about where you cut rates and trim capacity — we believe late 2024 will look different than the past several quarters.
Short-term gains today could cost you in the spot market tomorrow.
Keep core freight providers in the game.
Even if you have limited volume and need for them now, if you think you'll need them in a tight market, keep them engaged in your routing guide.
Now is the time to maximize planning and communication with the vendors you care about most.
Get your KPIs in order.
It's easy to slack off when rates are low and service is high. Get ready for a tougher market by setting and communicating your KPIs with your carriers. Make sure you have a good carrier scorecarding system in place.
If you need to brush up on transportation benchmarks, check out our research study on logistics KPIs.
Continued Learning: Truckload Market 101
These three helpful resources will help you learn about truckload market fundamentals and how we build our proprietary index.
If you're new to the Coyote Curve, take a few minutes to familiarize yourself with this foundational content:
Part I: Supply & Demand 101: Basics of Truckload Market Economics
Part II: Understanding the U.S. Truckload Market
Part III: Explaining the Coyote Curve
*We use the Cass Truckload Linehaul index as a proxy for contract rate performance.