A stable week paves the way for lower rates

A worrisome trend to start August turned a little brighter this week as truckload volumes experienced a slight bounce. August has traditionally brought stronger volume levels than July as back-to-school season is in full swing and the doldrums of summer wrap up. This year has been quite a different story, however. Barring a significant move higher in volume levels over the final five days of the month, the Outbound Tender Volume Index (OTVI) will end the month lower than where it began. This hasn’t happened in the month of August since the onset of the data set in 2018. In the last bear market (2019), OTVI from Aug. 1 to 31 increased by 2.2%, in line with the volume increase in 2018 (+2.2%) and just slightly below the 2021 increase (+3.1%). Currently, OTVI is 0.7% lower than where it began the month. Erasing that 0.7% decline is certainly feasible, especially since the Labor Day holiday looms on Sept. 5. Over the past week, OTVI has increased by 0.25% week over week (w/w) as volume levels started to move higher throughout the back half of the week. Despite the slight increase in volume levels over the past week, the softness this August is showing up as OTVI is 23.2% lower year over year (y/y), the negative reading so far this year. It is important to note that OTVI itself includes both accepted and rejected tenders, thus when the rejection rate is extremely high (or low) can skew the actual volume levels. That’s where CLAV, or Contract Load Accepted Volumes, comes into play. CLAV is an index that measures accepted load volumes moving under contracted agreements. In short, it is similar to OTVI but without the rejected tenders. Over the past week, CLAV has increased by 0.34%. Accepted contracted volume levels are still down 0.3% from the beginning of the month, meaning it’s likely CLAV exits August slightly higher than where it began as shippers attempt to move freight at the end of the month. Even with the slight increase this week, CLAV is still 7% lower than this time last year. Retailers are combating elevated inventory levels and with the more discretionary-focused retailers, the trends look even more worrisome. Target, which has canceled billions in new orders, made little progress in clearing inventory. In Q2, inventory levels increased by 2% quarter over quarter and are up 36% y/y, an indication that the inventory trouble isn’t going to be alleviated immediately. The number of markets that experienced volumes increase this week is essentially equal to the number that experienced volume levels decline w/w. Of the 135 freight markets, 67 experienced tender volumes increase over the past week. The largest increases came from markets that are relatively small freight markets in nature: Billings, Montana (+58.73%); Austin, Texas (+42.33%); and Elmira, New York (+39.82%). As for the largest freight markets in the country, the past week wasn’t all that bad. In Ontario, California, tender volumes increased by 5.02%, while in Atlanta volume levels were 6.37% higher w/w. By mode: The reefer market has continued its upward swing into this week as the Reefer Outbound Tender Volume Index (ROTVI) increased by 3.23% w/w. Compared to this time last year, reefer volumes are 25.52% lower. The dry van market has started to turn on as well as the Van Outbound Tender Volume Index (VOTVI) increased w/w after last week’s disappointment. VOTVI increased by 0.58%, outpacing the overall index, but like in the reefer market, volumes are 23.83% lower than they were this time a year ago. Capacity conditions remain loose as rejection rates tick slightly lower