Trucking rates have fallen back to 2017 levels, but costs have not



The longest freight market bull-run in over a decade is over as spot rates have fallen back to where they were two years ago. The problem presented to many carriers is that many of their costs have not. In this week’s chart, comparing wage and maintenance costs to average daily national spot rate over the last two years, spot rates have fallen back to under June 2017 levels while costs have continued to grow on a more even keel.
Spot rates are not a one to one relationship with carrier revenues, but they do offer insight into general direction. The longer spot rates remain elevated the likelihood carrier revenues will follow increases and vice versa.  The reason this happens is market pressure. If carriers can consistently get a higher price for performing the same job, they will increase contract rates to where the market will support them.
In many other industries, a steady increase of price is the norm, or stable inflation. There are instances, specifically in technology where the cost of an item falls as technology improves. Purchasing a top of the line plasma television set in 2004 could cost as much as $10,000, whereas a much higher quality ultra HD 4K TV of similar dimensions can be had for under $1,000 today. The price fell, due to decreasing costs. Rarely do prices drop without costs falling first. The highly fragmented trucking market does not follow this rule.
Most people involved in transportation over the past five to ten years would agree that 2018 was a bit of an anomaly in terms of volumes and increasing rates. Looking at the Cass Shipments Index and DAT national van freight rate index, this is apparent.

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