Skip to main content

Q4 2022 Truckload Market Forecast: Spot & Contract Freight Rate Trends

Corey Klujsza Headshot with "what's happening this peak season" in a header graphic

In our last quarterly update, despite rampant inflation and sky-high diesel, we finally saw our Coyote Curve® index cross the equilibrium line, diving deep into year-over-year deflation. 

The Q3 numbers are in: did the U.S. truckload market continue it's downward trajectory, or did continued inflation change the course of the market cycle?

We'll tell you everything you need to know in the Q4 Truckload Market Guide.

 

Q4 Truckload Market: The Complete Guide for Logistics Pros

New to the Coyote Curve? 

These essential resources can help you build foundational knowledge on the truckload market and our proprietary spot rate index. 

 

Q3 2022 Spot & Contract Trucking Rate Recap

Though inflation — both in the wider economy and fuel — persisted throughout Q3, we still saw an easier capacity and rate environment in the truckload market during the heart of the busy summer shipping season. 

Spot rates continued to decline and carrier capacity was easier to come by, as is typical for this phase of the truckload market cycle.

However, after one of the fastest downward moves we've seen in Q2, the descent in Q3 started to level off, signaling we could be nearing a deflationary inflection point.

Let’s take a closer look. 

Q3 2022 trucking rates were down 31.8% in the spot market and 7.3% in the contract market in this Coyote Curve graph

Download these charts as high resolution slides for your next presentation.
 


Q3 Truckload Spot Rates Went Deflationary
  • TL spot rates at the end of Q3: -31.8%
  • Down from -22.5% Y/Y deflation in Q2

Q3 Truckload Contract Continued Downward Trend
(But Still Inflationary)
  • TL contract rates*: 7.3% 
  • Down slightly from 10.5% in Q2
    This is in line with past cycle behavior (typically lags spot rate index by one or two quarters)

Q3 Takeaway
Despite another quarter of high diesel prices and inflation in the wider economy, both spot rates and capacity continued to soften, driven by our place in the truckload market cycle (more on that below). 

 

Current State: How Are Truckload Rates Still Going Down? 

The Consumer Price Index (CPI) was up 8.2% through September.

In Q3, the average national price for a gallon of diesel was $5.51, a record high, and up 64% Y/Y. 

How is it possible that truckload spot rates are still deflating? It's a function of how supply and demand work in the truckload market.
 

What's Driving Current Truckload Rate Deflation?
  • Influx of Carrier Capacity
    The market has been so tight for the last two years (and the spot market so lucrative) that carriers have added capacity into the market to meet demand, both adding trucks (when supply chains allowed) and drivers.
  • Wonky Year-Over-Year Comparisons
    The Coyote Curve measures current spot truckload rates relative to last year. And Q3 2021 was near a record peak for our index, making the current drop look especially severe.
    That said, actual rates are still declining (see below). 
  • Shifting Consumer Spending Patterns
    COVID-era spending was heavily weighted towards physical goods and less on the service economy (e.g., concerts, bars, restaurants).
    We're continuing to see more people spending their money on experiences and less on durable goods that require shipping.

Want Proof? Let's Look at All-In Rates

Take a look at our Coyote Curve Y/Y spot rate index up against our proprietary all-in cost-per-mile index — this is comparing annual change versus the absolute rate. 

(As a reminder, these numbers are informed by real transactional data from over 10,000 daily shipments spanning over 15 years.)

Though still well above pre-pandemic levels, the current all-in cost-per-mile is down over the past three quarters (and would be even more so if it weren't for diesel rates). 
 

Q4 2022 coyote curve spot market forecast graph showing index vs. actual trucking cost per mile

Download these charts as high resolution slides for your next presentation.

 

Demand: Key Economic Indicators Driving the Truckload Market

NOTE: At the time of publishing, we are still waiting on full Q3 results from the U.S. Government. Once available, we will update accordingly.

Though consumers are still experiencing inflation, the truckload market and the economy are not always coupled. 

And the opposite can be true.

We've had several economic recessions with inflationary truckload markets — we could very well see an economic recession in 2023 and an inflationary truckload market.

As of this publishing, we do not have all of the Q3 final numbers for industrial production, consumer spending, imports and inventories, but let's take a look at where Q2 left off.
 

Macroeconomic indicators

Download these charts as high resolution slides for your next presentation.
 

Consumer Spending

After a couple quarters of growth, consumption is showing signs of slowing, dipping down slightly from 12.8% at the end of Q1 to 11.3% through June. This is partially driven by inflation.

We're also seeing a rebalancing of consumer spending on durable goods versus services, which is always top-of-mind for truckload shipping.

Durable goods were actually deflationary at the end of Q1, which was the first time since before COVID-19 struck. As people spend more on experiences and less on physical goods, truckload demand eases off.


Industrial Production (IP)

Consumer spending, particularly on durable goods, drives production. At the end of Q2, IP finished at 4.8%, and is not pointing toward a recession, but if consumer spending takes a dive, expect IP to follow.


Imports

With chaos in international shipping markets over the past two years, this indicator has been particularly volatile. After hitting a high of 42.5% last year, imports were down to 21.4% at the end of Q2. 

The port congestion from Q2 has essentially cleared up, even with peak season approaching.


Inventory-to-Sales 

Over the past two years, to combat overall supply chain volatility and high demand, shippers have been working to build up inventory. 

They've stocked up on key items, carrying costs are starting to go up, driven by an increase in interest rates (the Fed's response to inflation). Now, businesses are trying to shed any excess inventory.

This indicator is now coming to the forefront due to the pressure it will put on shippers' bottom lines.
 

Economy Takeaway
We're still waiting on Q3 finals, but inflation may be starting to impact consumer spending, which would slow production, imports and ultimately, freight volumes.

As shippers struggle with inventory carrying costs due to rising interest rates, it could further pull down freight demand. 

Regardless of whether or not we dip into an economic recession, supply-side pressures will keep the truckload market cycle operating as usual (read on). 

 

Truckload Market Trends to Watch in Q3

We are seeing several tell-tale signs of a stabilized capacity environment and are well into the deflationary leg of the truckload market cycle. 

Before we dive into the updated Q4 forecast, let's unpack a few of the key trends impacting the market this quarter. 
 

1. Diesel Fuel

At the end of Q3, diesel was up ~64.1% Y/Y. Though slightly down (in year-over-year terms) from  in Q2, it's still well above pre-pandemic levels.

Graph showing U.S. national average of diesel rates, dropping to 64.1% y/y in Q3 2022
Download these charts as high resolution slides for your next presentation.
 

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.

In Q4, elevated fuel, combined with falling truckload rates, could drive out more carrier capacity from the market faster. 

This would, in effect, elevate the floor that rates would fall to and shorten the amount of time we stay in a deflationary environment.

 

2. Class 8 Truck Orders

After historically long backlogs throughout 2021, supply chain shortages are easing and OEM's are starting to fulfill truck orders. 

Carriers who wanted to replace old equipment or add net new capacity are getting trucks in their lot (see Q1 and Q2 2021).

For some carriers, order fulfillment may not come as a welcome relief, but a financial burden — the market they bought those trucks in looks very different than the one they're in now.
 

Class 8 ACT TL Market Q4 2022
 

This changing financial landscape could be an issue for many carriers as we head deeper into a deflationary market, which could pressure the supply side and potentially squeeze capacity out of the market, kicking off the next inflationary market.

Why Truckload Order Fulfillment Could Be a Burden:

  • More trucks, less loads — they are adding more fleet capacity right when freight volumes are starting to fall.
  • After several interest rate hikes from The Fed, equipment financing costs are much higher now compared to last year (when these purchase decisions were likely made). 
  • They are adding in large fixed costs to their budget, right when spot rates are dropping, with contract rates soon to follow.

3. Contract vs. Spot Rates

Though spot rates are already deflationary, contract rates remain inflationary...for now.

As we approach 2023 bid season, many shippers are looking forward to their next transportation RFP as an opportunity to bring their transportation spend back towards pre-pandemic levels.

Carriers currently running freight on primary rates are getting a significant premium to the spot market. When these primary rates reset in an upcoming annual bid, they will start to feel the crunch, especially if they have new equipment on the books (i.e., fixed costs).

Again, this will contribute to the next inflationary leg of the cycle. 
 

Truckload Trends Takeaway
An influx of new trucks, high prices at the pump, declining spot rates, and (likely) dropping contract rates will all put pressure on the supply side.

This will drive capacity out of the market, bringing about a deflationary inflection point and setting the cycle up for the inflationary climb. 

 

Q4 2022 Truckload Market Forecast

We've covered the current state, the macroeconomic environment, and key trends — but where does it leave us for the rest of the quarter? 

Will Peak Season have a dramatic impact on the market? 

Let's look at the forecast.

Q4 2022 trucking rate forecast

Download these charts as high resolution slides for your next presentation.


We expect spot rates to continue to deflate, even with Peak Season, likely hitting the bottom in Q4.

An important caveat: we're comparing ourselves to all-time highs set in Q4 2021, so the drop may appear a bit more dramatic than you'll actually experience. 

So how much are all-in rates going to slide? We anticipate that there is still a little more to go from the current state, but we are likely close to the deflationary inflection. 

If we spend another quarter or two in spot (and potentially contract rate deflation), it will push capacity out of the market, leading to the start of the next cycle in early 2023. 

 

What Can You Do? 

There is no silver bullet or special trick — it comes down to fundamentals.

Use the (relative) lull in shipping environment to maximize planning and communication with your core freight providers.

As you head into a bid, be prudent about where you're cutting rates and trimming capacity, keeping in mind we could be inflationary again before the end of 2023.

Are you sharing your data? Don't try to hold onto any secret sauce — we're all trying to solve for the same shipping problems, and the more collaboration the better. 

If you want to learn more about how your peers are using supply chain data, you can get insights from over 1,500 shipping pros in our KPI benchmarking research study.
 

Forecast Takeaway
We're well into a deflationary spot market and will likely stay there this quarter.

Contract rates will likely follow, and capacity will start to exit the market, setting up the next inflationary rate environment, likely by mid-2023 (regardless of whether or not we dip into an economic recession).

 

Watch Freight Market Experts

This session originally aired during the Q3 Supply Chain Master Series.

Watch now to get insights from supply chain pros at Coyote, S&P Global, and CSCMP as they dive into truckload, parcel, LTL, intermodal and international shipping trends for Q4.

 


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.

About the Author

Corey Klujsza is the VP of Pricing and Procurement Strategy at Coyote Logistics. His knowledge and expertise on freight markets guides Coyote's forecasting, capacity and rate planning.

Profile Photo of Corey Klujsza