Q3 freight market update: Our key insights for shippers

October 20 / US
Q3 freight market update: Our key insights for shippers

With supply expanding, capacity constraints loosening, and freight rates and consumer spend stagnating, shippers have a prime opportunity to refine and advance their logistics strategies heading into the final months of 2022 and beyond.

Our Q3 Market Update and Outlook Report captures these crucial market shifts and how they have impacted numerous U.S. shipping modes, as well as the significant trends popping up in European, Mexican, and other international markets. Here’s a high-level look at our data-backed findings for Q3 and action steps that shippers can take to navigate market unpredictability in the future.

Supply chain constraints ease up amid increase in trucks and drivers

The pandemic and driver retirement exacerbated the industry’s ongoing truck driver shortage over the last couple years which, in turn, contributed to supply chain backups. But now, we’re finally seeing signs of market growth: Long-distance truckload employment added some 1,400 jobs in June after seeing a record increase of 14,900 jobs in May. Truck driver employment is also 9% higher than it was a year ago, with many O/Os joining larger carriers as company drivers.

An increase in trucks is also complementing driver growth. Class 8 truck production during the first seven months of 2022 was 17% higher year over year, and truck order backlogs decreased by 28% since hitting their peak in September 2021. Lead time for carriers to receive trucks also decreased from 12 months in the first half of 2022 to eight to nine months in June and July.

Concurrently, net truck orders were 50% lower in Q3, suggesting that a softening spot market made carriers hesitant to commit to more equipment.

Consumer spend stagnates, while manufacturing starts to wane

As the economy came off of record inflation levels in June and July, spending is beginning to trend downward following lower personal savings and plunging consumer sentiment. The personal saving rate was 5% in July, the lowest it’s hit since the recession in 2009.

Meanwhile, after experiencing a strong 12 months, manufacturing has started to show signs of weakness as new orders contracted for two consecutive months and order backlogs decreased. These signs indicate that manufacturing demand has already peaked and is beginning to decline. Even with this deceleration, manufacturing output in July was still 3.2% higher year over year.

Notable shifts in LTL and intermodal transport

The past quarter saw some significant shifts in rates and capacity among different shipping modes, particularly with less-than-truckload (LTL) and intermodal.

Active LTL capacity reached its highest level in a decade, which shows that efforts to increase capacity over the past 18 months have finally paid off. Carriers have alleviated capacity constraints by taking steps like hiring qualified drivers, offsetting increased costs with automation improvements, and opening new terminals to expand density.

In the intermodal shipping space, the first half of 2022 saw shippers locking up capacity through renewal events—in turn, there were lower tender rejection rates and an overall improvement in freight coverage in Q3. Heading into the last months of 2022 and early 2023, the market expects intermodal to reach flat rates.

The state of international logistics

Our report also highlights key trends and forecasts for international markets, including Europe and Mexico.

Many factors are impacting supply in Europe, including extreme capacity constraints with carriers imposing high surcharges for additional capacity above contracted volumes. Russia’s invasion of Ukraine has also contributed to a driver shortage, with Ukrainian drivers leaving to defend their country. Europe has also seen a continued increase in pricing as driver costs skyrocket and new truck scarcity remains. The market is expected to continue facing falling driver numbers, truck shortages and fuel price volatility.

In Mexico, Laredo’s market has achieved a neutral market capacity for the first time in several months. While the market had 100 loads per truck in Q1, the average load to truck ratio in August was 3.5 loads per truck. Mexico also saw steady rate increases, with overall increases for exports, imports and domestic shipments ranging from 15 to 35% over the past 12 months.

Creating a proactive logistics strategy for the future

As we head into Q4 of 2022 and early 2023, shippers have an opportunity to adapt their logistics planning and strategy to achieve positive ROI and performance.

Action steps include tracking performance measurement by establishing frequent, detailed route guide performance assessments and continuously monitoring KPIs. To increase carrier compliance and accountability, shippers should consistently set KPI expectations with their core providers, and prioritize better collaboration with vendors and customers to achieve smoother transportation flows.

Shippers can also prioritize strategic carrier relationships by supporting their driver base with practices such as reducing time at the dock and trailer turns, and providing amenities like parking and restrooms.

Reducing strategic procurement cycle time is also a goal for shippers, which will involve improving market rate collection and implementation processes, and deploying new bid strategies, such as gap bids to gain potential savings and new carriers.

See our full Q3 Market Update and Outlook Report here.

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