Courtesy Talk Business & Politics, September 21, 2020
Trucking Industry Outlook Improves in Second Half of 2020

Low retail inventories and a healthy spot market have contributed to improved expectations for the second half of 2020 as the freight market tightens.

UBS analyst Tom Wadewitz updated his projections for a better than expected second half of the year for truckload carriers, according to a recent FreightWaves article.

“Truckload spot market data have shown a better-than-normal seasonal pattern with continuing strength in spot loads in July and August,” said Wadewitz, noting low retail inventory-to-sales ratio and declining inventories of big-box retailers.

  • According to the most recent data available from the U.S. Census Bureau, the inventory to sales ratio for retailers fell significantly between April and June. The ratio rose to 1.68 in April before falling to a low of 1.23 in June. The ratio indicates the number of months that retailers have in merchandise to meet sales demand.
  • “We note that inventory replenishment is a key driver of truckload and intermodal demand, and low inventories point to strength in demand in [the second half of 2020] and likely into 2021,” Wadewitz said.

He also said rising demand has contributed to a 30% increase in spot rates recently.
According to DAT Solutions, the spot rate for dry van freight rose to a record level in August as disruptions related to Hurricane Laura pushed more freight to the spot market.

“The freight market has tightened over the last two months, and we see transportation rates beginning to increase faster than expected,” said analyst Daniel Imbro of Little Rock-based Stephens Inc. Imbro recently released a note on how the freight market’s strength might impact the retail industry.

“In light of this, we have spoken with our industry contacts in the retail landscape to gauge the potential exposure to this trend,” Imbro added. “While we do not believe that near-term numbers are at risk, we believe this factor is not being appropriately considered by many consumer investors and could pose a risk heading into 2021 if capacity remains tight.”

For More Information

Advanced Training Systems has revolutionized the design and manufacture of high-tech simulators to improve driver training and create both better drivers and a safer world. In addition to hundreds of driving schools, we provide equipment and support for major shippers who do their own training, as well as customized solutions for those with particular training needs. For more information or to schedule a demo, please contact us here.