Amid Supply-Chain Constraints, Freight Demand Strength Overlooked

ACT Research reported that as supply-chain constraints continue to dominate the conversation

In the release of its Commercial Vehicle Dealer Digest, ACT Research reported that as supply-chain constraints continue to dominate the conversation, broad-based economic and freight market strength is often overlooked.

Kenny Vieth, ACT’s President and Senior Analyst, noted, “In addition to long lead-time manufacturing demand, US consumers’ economic footprint has never been bigger.” He elaborated, “Incomes are growing at above-trend rates, and thanks to low interest rates, consumer debt service levels are 100bps below Q4’19 levels, which in turn were historically low. Additionally, since the beginning of 2020, household net worth is up 23%, while millennial demographics [21 to 39] are in a sweet-spot for family creation, home building and goods consumption.” When asked how COVID variants are impacting the equation, Vieth said, “Spikes in COVID case counts are likely to extend consumer spending substitution toward goods and away from services.”

About how the substitution toward goods is effecting the transportation industry, he commented, “The combination of healthy consumer/corporate balance sheets and pent-up inventory demand translates into continued robust freight markets and still-rising freight rates. At the end of 2021, strong and rising spot market freight rates, nominally and relative to contract rates, reported by DAT suggest that truckers will maintain the upper hand in rate negotiations with shippers at least through the first half of 2022.” Vieth concluded, “That leverage promises to further elevate carrier profitability and we reiterate that carrier profits are arguably the key indicator for fluctuations in new vehicle demand.”

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