U.S. Bank Freight Payment Index: Less Contraction, Regional Bright Spots in Second Quarter

Rhea-AI Summary

The U.S. Bank Freight Payment Index for Q2 2023 shows signs of improvement in the truck freight market, despite continued contraction. Shipments decreased by 2.2% and spending fell by 2.8% nationally, marking a slower decline compared to Q1. Notably, three regions - West, Northeast, and Southeast - experienced increased shipment volumes, a first in over a year. Year-over-year, shipments were down 22.4% and spending decreased 23.5%. The West region saw a 1.5% increase in shipments, its first gain since Q1 2022, while the Southwest continued to struggle. The Midwest posted declines, while the Northeast and Southeast showed positive signs with increased shipments for the first time in years.

Positive

• Slower decline in national shipments (-2.2%) and spending (-2.8%) compared to Q1
• Three regions (West, Northeast, Southeast) experienced increased shipment volumes
• West region saw a 1.5% increase in shipments, first gain since Q1 2022
• Northeast shipments increased for the first time in two years
• Southeast shipments rose for the first time in three years

Negative

• National shipments down 22.4% year-over-year
• National spending decreased 23.5% year-over-year
• Southwest region struggling with 13.6% decrease in shipments
• Midwest experienced sequential declines for five consecutive quarters
• Trucking companies facing challenges of lower volumes, suppressed rates, and higher costs

Insights

Transportation Industry Analyst

The U.S. Bank Freight Payment Index for Q2 2023 reveals a mixed but potentially stabilizing picture for the trucking industry. While overall shipments and spending continue to decline year-over-year, the rate of contraction has slowed significantly compared to Q1. This could indicate that the industry is nearing a bottom, which is important information for investors in transportation and logistics companies.

Key takeaways:

• National shipments decreased by 2.2% quarter-over-quarter, a notable improvement from the 7.8% drop in Q1.
• Spending contracted by 2.8%, much less severe than the 16.8% decline in Q1.
• Three regions (West, Northeast and Southeast) showed increased shipment volumes, a positive sign not seen in over a year.

However, the year-over-year figures remain concerning, with shipments down 22.4% and spending down 23.5%. This indicates that while the situation may be stabilizing, the industry is still far from a full recovery.

The regional variations are particularly interesting. The West's 1.5% increase in shipments, driven by improved seaport volume and cross-border activity, could signal opportunities for companies with strong presence in this region. Conversely, the Southwest's continued struggles suggest caution for investors in companies heavily exposed to this market.

Overall, this report suggests a potential turning point for the trucking industry, but investors should remain cautious given the ongoing challenges of lower volumes, suppressed rates and higher costs.

Economic Analyst

The Q2 2023 U.S. Bank Freight Payment Index offers valuable insights into the broader economic landscape. The trucking industry often serves as a leading indicator of economic health and the current data paints a picture of an economy still grappling with challenges but showing signs of potential stabilization.

Key economic implications:

• Consumer behavior shift: The report notes a preference for spending on experiences rather than goods, which aligns with post-pandemic trends and impacts various sectors beyond transportation.
• Regional economic disparities: The varied performance across regions highlights the uneven nature of economic recovery. The West, Northeast and Southeast showing growth could indicate stronger economic activity in these areas.
• Inflation and interest rates: The continued contraction in freight spending, albeit at a slower rate, suggests ongoing deflationary pressures in the goods sector. This could influence Federal Reserve policy decisions.
• Supply chain normalization: Improved seaport volumes in the West and Southeast indicate potential easing of supply chain bottlenecks, which could benefit a wide range of industries.

The 23.5% year-over-year decline in spending is significant and suggests continued economic headwinds. However, the slowing rate of decline could indicate that the economy is adapting to the new post-pandemic reality.

Investors should watch for potential ripple effects in related sectors such as retail, manufacturing and real estate, as these are closely tied to freight activity. The data also underscores the importance of regional diversification in investment strategies.

Logistics Consultant

The Q2 2023 U.S. Bank Freight Payment Index provides important insights for logistics strategies and investment decisions in the transportation sector. The data suggests a potential inflection point in the freight market, with implications for capacity management and pricing strategies.

Key considerations for logistics:

• Capacity adjustments: The ongoing volume declines, despite some regional improvements, indicate a need for continued capacity optimization. Trucking companies may need to further reduce fleet sizes to match demand.
• Pricing pressure: The 23.5% year-over-year decline in spending suggests persistent downward pressure on freight rates. This could lead to further consolidation in the industry as smaller carriers struggle to remain profitable.
• Regional strategies: The varied performance across regions highlights the importance of geographically tailored approaches. Companies with flexible networks may benefit from shifting resources to stronger markets like the West and Northeast.
• Intermodal opportunities: Improved seaport volumes in the West and Southeast could signal growing opportunities for intermodal transportation, potentially benefiting rail and logistics companies that specialize in port-to-door services.
• Technology investment: In a challenging market, companies that invest in efficiency-enhancing technologies may gain a competitive edge. This could include route optimization software, digital freight matching platforms and fuel efficiency technologies.

The slowing rate of decline in both shipments and spending suggests that the market may be finding a new equilibrium. However, the "triple challenge" of lower volumes, suppressed rates and higher costs mentioned by Bob Costello indicates that the road to recovery may be long and challenging for many in the industry.

Investors and industry participants should closely monitor these trends and be prepared for potential structural changes in the freight market as it adapts to new economic realities.

Truck freight shipments increase in West, Northeast and Southeast regions compared to first quarter

MINNEAPOLIS--(BUSINESS WIRE)-- Truck freight volumes and spending continued to drop in the second quarter, but at a slower pace than recent quarters, according to the latest U.S. Bank Freight Payment Index. Shipments increased in three regions – the West, Northeast and Southeast – on a quarterly basis, the first time multiple regions have experienced increased volume in more than a year.

“Our data is showing some signs that the very challenging freight market could be nearing a bottom,” said Bobby Holland, director of freight business analytics, U.S. Bank. “There are still headwinds for carriers, but at least in terms of volume, there are some bright spots across the country.”

In the second quarter, shipments nationally dropped 2.2% while spending contracted 2.8% on a quarterly basis. The declines were less severe than the first quarter, when spending fell 16.8% and shipping volume dropped 7.8%. Still, second quarter shipments were down 22.4% compared to a year earlier and spend was off 23.5%.

“Trucking companies are facing a triple challenge of lower volumes due to consumer preference to spend on experiences versus goods, suppressed rates and higher costs,” said Bob Costello, senior vice president and chief economist at the American Trucking Associations. “This situation is likely to cause further capacity reductions in the industry.”

The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment, which processes more than $42 billion in freight payments annually for shippers and carriers across the U.S. The Index insights are provided to U.S. Bank customers to help them make business decisions and discover new opportunities.

Data

National Data
Shipments
Linked quarter: -2.2%
Year over year: -22.4%

Spending
Linked quarter: -2.8%
Year over year: -23.5%

Regional Data
West
Shipments
Linked quarter: 1.5%
Year over year: -19.8%

Spending
Linked quarter: -2.3%
Year over year: -25.5%

This marked the first sequential volume gain for the West since the first quarter of 2022. Seaport volume as well as truck-transported exports and imports in the region have increased, which boosts truck freight.

Southwest
Shipments
Linked quarter: -13.6%
Year over year: -26.8%

Spending
Linked quarter: -1.4%
Year over year: -25.5%

The Southwest truck freight market has struggled the last several quarters after outperforming other regions in parts of 2022 and 2023. The 1.4% quarterly spending drop was much better than the first quarter, when spending was down -16.5%. Cross border trucking in the region has been one of the few bright spots for the market.

Midwest
Shipments
Linked quarter: -2.7%
Year over year: -20.3%

Spending
Linked quarter: -6.0%
Year over year: -23.1%

One of only two regions to post a quarterly decline in volumes, the Midwest experienced sequential declines in five consecutive quarters. The findings align with flat or slightly declining economic indicators in the region.

Northeast
Shipments
Linked quarter: 2.7%
Year over year: -25.2%

Spending
Linked quarter: -0.1%
Year over year: -26.9%

This was the first time in two years the Northeast experienced a quarterly increase in shipments. According to the Federal Reserve’s Beige Book, spending on goods have held steady in the region, which supports truck freight.

Southeast
Shipments
Linked quarter: 1.8%
Year over year: -22.9%

Spending
Linked quarter: -0.9%
Year over year: -20.3%

Southeast shipments increased for the first time in three years. The region is experiencing improved home construction, retail demand and seaport volume.

To see the full report including in-depth regional data, visit the U.S. Bank Freight Payment Index website. For more than 25 years, organizations have turned to U.S. Bank Freight Payment for the service, reliability, and security of a full-service, federally regulated financial institution. The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment.

About U.S. Bank

U.S. Bancorp, with more than 70,000 employees and $680 billion in assets as of June 30, 2024, is the parent company of U.S. Bank National Association. Headquartered in Minneapolis, the company serves millions of customers locally, nationally and globally through a diversified mix of businesses including consumer banking, business banking, commercial banking, institutional banking, payments and wealth management. U.S. Bancorp has been recognized for its approach to digital innovation, community partnerships and customer service, including being named one of the 2024 World’s Most Ethical Companies and Fortune’s most admired superregional bank. Learn more at usbank.com/about.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801975263/en/

Todd Deutsch, U.S. Bank Public Affairs & Communications

todd.deutsch@usbank.com

Source: U.S. Bancorp

FAQ

What were the national shipment and spending changes for U.S. Bank Freight Payment Index in Q2 2023?

In Q2 2023, national shipments decreased by 2.2% and spending fell by 2.8% according to the U.S. Bank Freight Payment Index.

Which regions showed improvement in shipment volumes in Q2 2023 for U.S. Bank (USB)?

The West, Northeast, and Southeast regions showed improvement in shipment volumes in Q2 2023 according to U.S. Bank's Freight Payment Index.

How did the West region perform in Q2 2023 according to the U.S. Bank Freight Payment Index?

The West region saw a 1.5% increase in shipments in Q2 2023, marking its first sequential volume gain since Q1 2022.

What challenges are trucking companies facing according to the U.S. Bank Freight Payment Index report?

Trucking companies are facing a triple challenge of lower volumes due to consumer preference for experiences over goods, suppressed rates, and higher costs.

How did the Southwest region perform in Q2 2023 based on the U.S. Bank (USB) Freight Payment Index?

The Southwest region struggled in Q2 2023 with a 13.6% decrease in shipments and a 1.4% decrease in spending compared to the previous quarter.