Freight volumes and rates declined in February, but we’re closer to the end than the start of this freight downcycle. Rate trends should begin to recover as soon as traction on freight volumes is established, and slower capacity growth this month is a hopeful sign the bottoming process is closer, as fleets begin to respond to softer market conditions, according to the latest release of ACT Research’s For-Hire Trucking Index.

The Trucking Volume Index was in contraction territory for the eighth month of the past eleven months in February at 41.3 (SA) from 51.6 in January. Volumes remained soft amid a market of mixed economic signals.

Tim Denoyer, Vice President & Senior Analyst at ACT Research, said, “The soft freight market persists as inflation continues to impact consumers’ purchasing power, and recent bank failures and job cuts make recession more likely.”

Pricing Index weakness continues, decreasing 6.3 points, to 39.3 in February (SA) from 45.6 in January. This is only the fourth time in the index’s history that prices have been in the thirties.

He added, “The cure for low prices is low prices, and we currently estimate spot rates are 16 percent below fleet operating costs, which should expedite this bottoming process. Even as freight demand fundamentals will likely remain soft, seasonal increases in TL volumes as capacity slows and eventually tightens will build the bottom of the spot rate cycle in the next couple of months.”

The Capacity Index declined by 3.7 points month over month to 51.0 in February, indicating slower growth. Capacity has improved in terms of both equipment and drivers the past year, with improvements in the supply chain and as drivers have shifted to larger, well-capitalized fleets after the sharp fall in spot rates. While one month does not make a trend, slower capacity growth this month is a key sign the bottoming process is happening, as fleets begin to respond to softer market conditions.

After rallying in January, the Supply-Demand Balance reverted looser, falling to 40.1 (SA) in February from 47.0 in January, with the month-over-month declines in both volumes and capacity.

Denoyer concluded, “The trucking market has been loose for a full year based on this series. Though the loose environment is expected to persist in the near term, we expect less loosening from here.”