Dive Brief:

• The freight market showed slight growth from April to May (up 1.6%), but was still down nearly 24% year over year, according to the Cass Freight Shipment Index. The report doesn't expect a pre-pandemic level of volume to return until 2021.
• Freight expenditures were down 21% year over year, even more than shipments. With prices also down year over year, this is likely explained by the fact that "customers who remained opened for business had a higher freight cost per shipment than those who were closed," Cass explained.
• But Cass does believe that per-mile linehaul rates bottomed out in April when they were down 7% year over year. Rates were down 5% year over year in May, according to the Cass Truckload Linehaul Index. "Of course, it is the supply/demand balance that determines truckload rates, and there’s really nowhere to hide when volumes drop off a cliff," Cass said.

Dive Insight:

Carriers have also noted the market showed some signs of life in May.

"The degradation in volumes appear to have stabilized as we moved into the last couple of weeks of April and the first week of May," YRC CFO Jamie Pierson said on an earnings call last month.

But carriers are also trying to manage capacity at a time when demand is hard to come by. DAT's load-to-truck ratio, a measure of demand in the trucking market, fell to 0.98 in April before increasing again to 1.9 in May.

"​We have moderated our incoming driver hiring numbers for the months of April and May to account for the more tepid demand levels," Schneider National CEO Mark Rourke said last month. "On a month-to-date basis, on a year-over-year comparison, truckload build miles are currently down high single digits daily from the prior year."

A research note from UBS suggests that falling Class 8 tractor sales paired with lower employment in the trucking industry point to lower capacity moving forward, which could mean a more expensive contract season for shippers. "We expect a combination of lower capacity and a rebound in freight activity to support mid-single digit contract pricing in the 2021 bid season," UBS analysts wrote.

UBS and Cass agreed the market will likely show even more improvement in the June numbers. But the scale and timing of recovery depend largely on the uncertainty surrounding customer demand amid high unemployment and a pandemic that is reaching record numbers of cases in states that had taken steps to reopen economies.

"Medium-term freight demand will likely depend on how quickly consumer spending and manufacturing activity recover and the extent to which current inventories are worked down," UBS said in another research note.