The trucking industry continues to witness fortunes turning after a rather turbulent period that saw many established carriers go bankrupt or exit the market due to their inability to manage the devastating downturn the market was experiencing. July saw shipment volumes go up, and naturally, the rates of the truckload and LTL adjusted to the demands as well. As inflation continues to slow down, the Fed may gear up to cut rates in the following months after hiking rates steadily for over three years.
This newsletter explores the latest news and trends across North American freight, CPG, and retail markets. Continue reading to find out more:
Shippers are gradually starting to feel the impact of the trucking market on a rebound as truckload and LTL shipping rates went up in July. According to the Cass Freight Index, the reason is a 3% rise in shipment volume month to month (between June and July) — a first in four months. Although truckload and less-than-truckload rates were higher, the former is still down 1.9% year-over-year, while the latter is up 7.1% from a year ago.
While increased shipping volumes have contributed to higher prices, the duration of this spike remains uncertain. The bankruptcy of Yellow, a major LTL player, continues to impact the LTL market, as it is one of the reasons for tighter capacity in the LTL sector, keeping prices high.
The consumer price index, which is calculated annually, hit a three-year low in July, rising 2.9%. This news is fueling expectations that the Federal Reserve could trim the primary interest rate by at least a quarter percentage point next month. Considering that prices like energy remained unchanged while prices for apparel and used vehicles decreased despite a 0.4% rise in shelter, the expectations are not far-fetched.
However, the Fed must balance this positive inflation news against signs of a cooling economy and job market. Some experts predict a quarter-point rate cut in September and December, but others caution against acting too quickly and emphasize the need for continued progress on lowering inflation. The latest reports show an economy moving closer to the Fed’s desired goal. And for the first time in a while, the rate cut is more likely than not.
As the de minimis exemption continues to be criticized, its future is anyone’s guess. The ruling, which came into existence over 100 years ago, has become a prominent feature in the US import ecosystem today. This is especially true for international e-commerce brands, which rely on de minimis to ensure goods reach their customers across the US on time and at cheaper rates.
While it is almost a customs ‘loophole’ now, it wasn’t always this way. De minimis evolved from a personal-use exemption to its current state largely due to the popularity of cross-border e-commerce and the pandemic. Over the years, this exemption has been updated several times, with the current threshold now set at $800.
Companies like Temu and Shein are heavily exploiting it, accounting for about 30% of daily U.S.-bound de minimis volume. Despite this exploitation, believing these businesses only use the loophole to cut shipping costs would be short-sighted. They also use it to ensure quick response to consumer trends and lean inventory management by shipping directly from factories to customers.
While the freight market has recently shown positive volume movement, the latest data from Cass Information Systems confirms that the prolonged downturn may finally be bottoming out. Despite shipments and expenditures still down compared to last year, the declines are far less severe than those witnessed in previous months.
The enthusiasm surrounding the news is partly due to a slight increase in demand and tighter capacity additions from private fleets in the truckload market. Spot rates are stabilizing, and contract rates could be turning upwards shortly. On the other hand, LTL demand remains soft, but LTL rates remain high because of tighter capacity.
Finding and working with the right logistics partner becomes a non-negotiable as the freight market continues to stay volatile. By leveraging technology in transport processes, shippers can mitigate potential disruptions and complexities that threaten operations and prevail with a flexible and agile supply chain.
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Operating on the world’s first collaborative logistics platform, Zengistics is a technology company that executes freight.
