Freight cycles are anything but regular
We call them freight cycles, but the term implies a regularity the data doesn’t support. Since 2000, the domestic transportation market’s turns have looked less like clockwork and more like a series of random shocks The post Freight cycles are anything but regular appeared first on FreightWaves .
The domestic freight market has experienced a series of cycles since the beginning of the century, with predicting their start and end points proving challenging. The Cass Freight Shipments Index (CFIS) and the Cass Truckload Linehaul Index (CTLI) serve as useful indicators of this volatility. CFIS encompasses shipments from various modes, providing a comprehensive view of overall transportation demand, while CTLI gauges truckload rates without the influence of fuel and accessorial charges.
Over the past 25 years, distinct cycles of demand and rates have emerged, with an anomaly in the middle. Starting in 2000, the CFIS captured the aftermath of the dot-com collapse and the economic fallout from 9/11, with muted goods demand persisting longer than the broader economy. The housing boom and subprime mortgage market fueled a surge in freight brokerages and owner-operators during this period.
In 2008, the Great Recession began, with weakness lingering into 2010. However, the period that followed marked the most stable era in the past 26 years, with CFIS displaying a clear seasonal pattern and CTLI growing at about 3% per year. In 2015, energy market collapse led to a mini freight recession lasting through most of 2016. Economic growth slowed, and truckload rates fell as demand faltered until 2017, when capacity tightened, and demand returned, leading to a strong rate upswing in 2018.
The 2019 freight recession saw significant trucking failures, exacerbated by the COVID era's disruptions. The data suggests that timing any cycle is futile, as factors like regulatory pressures, diesel prices, and interest rates contribute to the market's complexity. Demand remains relatively weak, yet inflation and supply chain issues create a paradoxical environment.
As we approach the beginning of a new cycle, it's essential to acknowledge that higher barriers to entry and other factors will shape the market's trajectory. Businesses must plan for a cycle lasting at least a year, keeping in mind the potential for extension or contraction based on economic surprises and the broader impact on revenue.
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