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Weekly Transportation Update 04/21/20

May 2, 2020

Coronavirus shut-downs continue to impact the North American freight industry. The extensions of stay at home orders into May has affected consumer confidence. The consumer confidence index dropped 12.6 points due to a large decline in the short-term outlook for income, business, and labor market conditions. Declines in consumer confidence correlate with reduced discretionary spending, which has a negative impact on the freight market.

Volumes

After peaking on 03/23/20, outbound tender volumes have dropped for the past three weeks down 35%. Of 15 major freight markets, only the Fresno, CA market showed a week over week increase (2.53%). Outbound tender rejections are at their lowest point in 2020 down 75% since the March 28th peak.

Dry van volumes booked through DAT fell 20% during the first two weeks in April. Dry van rates fell 8 cents to $1.78 per mile (including fuel surcharges).

There is a disconnect between tucks carrying essentials and those carrying other goods. With consumer spending down and no jobs, income, or spending, a lot less freight needs to be moved.

Diesel prices

Diesel prices (US Highway) for the week ending 04/19/20 averaged $2.48 per gallon a drop of .667 cents from one year ago. Gas prices continue to decline due to Cornavirus lowering demands and a January price war between Saudi Arabia and Russia. A US Oil futures contract went into negative territory for the first time ever on 04/20/20, demonstrating how bad the oil market it. Although cheaper gasoline helps freight operating costs, the oil sector accounts for 3-5% of freight.

Class 8 sales

Orders for new class 8 vehicles fell 49.4% from one year ago (15,783 03/19 to 7800 03/20). Cancelations of orders are also expected to increase. The cancelations are mainly expected to come from smaller fleets, whereas larger fleets are expected to continue with current purchase cycles.

Used Class 8 sales were up 5% over March of 2019, but were down 8% from last month. Freight was strong in early March due to food and essential buying but is expected to continue to contract which will continue to impact used class 8 sales.

The depth of the impact of the Coronavirus on freight will be difficult to predict until the economy reopens and we get a better sense of how long it will take to get people back to work.

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