Truck Linehaul Index Continues to Accelerate

“We expect more nominal record highs in the coming months, with slightly lower percentage increases as comparisons grow increasingly tough through February,” stated Donald Broughton, analyst and commentator for the Cass indexes. “Four months ago, we increased our realized contract pricing forecast for 2018 from a range of 6% to 8% to a range of 6% to 12%. We believe that this continues to be the strongest normalized percentage level of truckload pricing achieved since deregulation (normalized meaning except for extreme periods of recovery from recession).”

The Cass Expenditures Index is signaling continued strong pricing power for those in the marketplace who move freight. Demand is exceeding capacity in most modes of transportation by a significant margin. In turn, pricing power has erupted in those modes to levels that continue to spark overall inflationary concerns in the broader economy.

With the Expenditures Index up 19.3%, Cass reported: “We understand those concerns, but are comforted by two factors: the cost of fuel (and resulting fuel surcharge) is included in the Expenditures Index and the cost of diesel was up 17.3% in September; almost all modes of transportation are using the current environment of pricing power to create capacity. Especially to the extent that pricing is materially exceeding the marginal cost
of creating that capacity, market participants are investing heavily in the exact activities which kill pricing power in commodity markets (i.e., expansion of capacity with the belief that current pricing power will endure for an extended period of time).”

Case further noted: “As we explained in previous months, we do not fear long-term inflationary pressure as technology provides multiple ways to ever-increase asset utilization and price discovery in all parts of the economy, especially in transportation. In fact, we are continuing to see more signs that ELDs (Electronic Logging Devices), which initially hurt the capacity / utilization of truckers (especially small truckers), are becoming an ever-smaller impediment to capacity utilization. Many of the truckers which were the most adversely effected are now getting most, if not all of, the original loss in utilization back. This is especially true in the Dry Van and Reefer (temperature control) marketplaces of trucking. Even the Flatbed segment of trucking, which initially faced the greatest challenges with productivity after the adoption of ELDs, has begun to adapt.”