Spot Pressure to Persist on More Capacity Additions

ACT expects excess capacity to exert more downward pressure on truckload spot rates

ACT Research released the October installment of the ACT Freight Forecast, U.S. Rate and Volume OUTLOOK report covering the truckload, intermodal, LTL and last mile sectors. After a less negative spot environment over the summer, ACT now expects excess capacity to exert more downward pressure on truckload spot rates. ACT Research also introduced its Q3’20 truckload spot rate forecasts in this month’s report.

Tim Denoyer, ACT Research’s Vice President and Senior Analyst, said, “The rebalancing trend is still valid for 2020, but we think Q4 spot rates will actually fall from Q3 this year, counter to the seasonal pattern, due to the supply/demand imbalance detailed in the Freight Forecast report.”

He continued, “We see the signs that capacity is beginning to come at the margin in some places, from company failures to lower for-hire employment data, but the industry still added about 5,000 net new tractors to the US highways last month. This reflects ongoing capacity additions by private fleets, as the for-hire sector isn’t the problem. This will change next year, but this rate of capacity addition will continue through year-end.”

Freight softened in recent weeks, following the September 1^st tariff imposition, and after a brief respite earlier in Q3, the freight recession is showing signs of broadening amid weaker industrial indicators. While holiday spending and pre-tariff inventory building may help volumes in Q4, we continue to see heightened risk of weak freight volume in early 2020 as inventories draw down.

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