Q3 U.S. Bank Freight Payment Index sees decent gains

The third quarter edition of the recently-released U.S. Bank Freight Payment Index picked up where the second quarter edition left off: showing high levels of truckload freight volume and spending, coupled with a few concerning caveats, in the form of ongoing supply chain challenges, weather, and the economic impact of the Delta variant.

This report, which was initially launched in the third quarter of 2017, is comprised of data on freight shipping volumes and spend on both a national and regional basis. The report’s data is based on the actual transaction payment date, highest-volume domestic freight modes of truckload and less-than-truckload and is seasonally- and calendar-adjusted. Its historical data goes back to 2010, with a base point of 100, and its index point for each subsequent quarter marks that quarter’s volume in relation to the preceding quarter. U.S. Bank Freight Payment's business processed $31.4 billion in 2020 for some of the world’s largest corporations and government agencies.

The report’s shipment index value—at 124.6—increased 1.5% compared to the second quarter (down from a 4.4% growth rate, from the first quarter to the second quarter) and increased 2.4% annually. On a year-to-date basis, through the first three quarters of 2021, shipments are up 1.1% annually. 

The third quarter freight spend reading—at 246.8—was up 5.6% compared to the first quarter (down from a 10.1% increase, from the first quarter to the second quarter) and saw a 32.6% annual increase. This spend reading marks the highest level on record, and the 32.6% annual increase represents the second straight quarterly increase of more than 30%, and is also the second-largest increase on record, trailing only the first quarter, at 44%.

In the report, American Trucking Associations Chief Economist Bob Costello wrote that shipments showed growth, but at a slightly slower pace in the third quarter sequentially and annually, which he noted reflected various headwinds.

“This included an increase in the COVID-19 Delta variant, general supply chain constraints and auto plant slowdowns/shutdowns due to supply chain and microchip shortage issues,” observed Costello. “In addition, there were seasonal storms, especially in the Southeast region, impacting the quarter’s performance. Despite these headwinds, the shipments index grew both sequentially and year-over-year because of strong freight activity. Positive contributors to freight shipments included robust port import traffic, solid home construction activity, continued robust household spending for goods and services, solid cross-border truck traffic with Mexico and Canada and improved factory output in some sectors.”

On the freight spend side, Costello observed that third quarter spend remained higher, with both freight rates and diesel seeing gains.

And he added that while growing freight transportation demand is helping to push the spend index higher, the larger factor is the increasingly tight trucking industry capacity.

“In the second quarter, limited truck capacity was due mainly to the driver shortage, but an emerging and significant factor during the third quarter was also the lack of new equipment,” he wrote. “Truck and trailer manufacturers were unable to deliver as expected during the third quarter because of manufacturing supply chain bottlenecks, including, but not limited to, semiconductors. This is a significant consideration that is expected to continue well into 2022 and will likely slow capacity growth.”

On a regional basis, the report found that third quarter shipments were mixed sequentially, with the West up 13.8%, Southwest up 1.9%, Midwest down 0.7%, Southeast down 2.9%, and Northeast up 5.1%. Annually, shipments were up 17.3% out West, up 4.3% in the Southwest, down 5.2% in the Midwest, up 3.6% in the Southeast, and up 1.7% in the Southeast.

On the spending side, it found that third quarter spend saw across-the-board sequential gains, with the West, up 15.75, a 5.9% gain in the Southwest, a 3.0 gain in the Midwest, a 3.6% gain in the Southeast, and a 3.1% gain in the Northeast. Annually spend saw a 44.0% gain out West, with the Southwest up 26.8%, the Midwest up 26.0%, the Southeast up 34.7%, and the Northeast up 31.7%.

In a previous interview with LM, Bobby Holland, U.S. Bank vice president and director of Freight Data Solutions, said there continues to be increases in demand for freight shipments, which is only expected to increase as the economy recovers and retailers work to replenish their inventories.

“At the same time, the industry is facing one of the largest supply crunches in history, driven in large part by a major truck driver shortage. This shortage, along with rising fuel prices, is causing considerable spending increases for shippers,” he said.

With over the road capacity still very tight, Holland noted it is hard to gauge whether rates stay at current levels, based on data alone, while rates have been climbing for some time, as the capacity constraints have continued and shippers and carriers continue to adapt.

And with shipment growth still below pre-pandemic levels, he said that the market continues to adjust to what he called the new normal, with shifts in consumer patterns, in the form of travel and social events ramping up, retail adjusting back to more brick and mortar while online stays high.

“As consumer confidence continues to grow, industries and market sectors are expected to continue their rebounds,” he said. “In addition, the capacity shortage will need time to resolve, both in terms of new drivers on the roads, as well as additional trucks.”