Q3 U.S. Bank Freight Payment Index shows decent momentum

Third quarter freight shipment and spending levels showed improvement over the first half of the year, a period over which a significant portion of it was heavily impacted by the ongoing COVID-19 pandemic, according to the most recent edition of the U.S. Bank Freight Payment Index, which was issued this week by Minneapolis-based U.S. Bank.

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 processes more than $28.8 billion in global freight payments for U.S. Bank’s corporate and federal government clients.

American Trucking Associations (ATA) Chief Economist Bob Costello, wrote in the report that third quarter shipment and spend showed gains compared to the second quarter confirming that various sectors in the goods economy are faring well amid the pandemic. And he added that third quarter spending appears to have shifted from services to goods, which relies more heavily on trucking.

And he added that e-commerce sales continued to grow, with gains also being seen on the brick-and-mortar side, too. What’s more, he pointed to retailers focusing on restocking inventories that were depleted over the summer months.

The report’s third quarter National Shipment Index—at 114.9—was up 6% compared to the second quarter and down 7.6% annually.  This followed a 7.6% decline, from the first quarter to the second quarter.

On the spending side, the report’s third quarter spend index—at 186.0—was up 14.6%, from the second quarter to the third, and was off 7.3% annually. The sequential gain nearly erased the 13.7% spending decrease, from the first quarter to the second quarter.

Costello explained that with the gain in shipments, spending saw increases, coupled with freight rates, due to truckload capacity tightening up in the third quarter. And he added that capacity tightness was driven by higher shipment volumes, for-hire fleets operating fewer trucks, difficulties in training new drivers over the course of the pandemic, and a return of the truck driver shortage. 

On a regional basis, the report stated that third quarter shipments largely saw gains on a sequential basis, with the West up 8.8%, Southwest down 0.5%, Midwest up 2.5%, Northeast up 1.7%, and Southeast up 12.5%. Annually, shipments were down 9.8% out West, down 10.4% in the Southwest, down 10.5% in the Midwest, up 5.0% in the Southeast, and down 23.1% in the Northeast.

As for spend, on a regional basis, the report stated that second quarter spend saw gains on a sequential basis, with the West up 21.7%, Southwest up 12.0%, Midwest up 8.0%, Northeast up 12.1%, and Southeast up 18.6%. Annually, spend levels were up 0.4% out West, down 10.9% in the Southwest, down 12.1% in the Midwest, down 3.2% in the Southeast, and down 16.3% in the Northeast.

U.S. Bank Freight Data Solutions Director Bobby Holland said in an interview that looking back, at the end of the first quarter into the second quarter, U.S. Bank had been stating that the trajectory of economic recovery would be dependent on stay-at-home orders.

“That is something we have seen, with many more states opening up at the end of the second quarter and into the third quarter,” he said. “We have seen the results of that [in these numbers]. It has resulted in higher shipping activity, for a variety of reasons. And we said we were looking at a flat, or down, Q2, a flat Q3, with maybe some increases, and hopefully a good holiday season in Q4, which is what we said back in Q2.”

Holland that over the second quarter, as summer approached and into the third quarter, people were taking vacations, especially in the Southeast, which improved shipping levels in that region. What’s more, he pointed to increased inventory replenishment, too, in tandem with the reopening of the economy.

“All that inventory that was being stored after Q1 shutdown orders started to drive shipping activity, in anticipation of a strong holiday season, and a lot of decisions were made after the shutdowns, when the pandemic started, which led to truck sales declining and did not increase capacity,” he said. “Now that things are starting to open up we are kind of behind the curve a little bit and seeing a capacity shortage as a result, coupled with a truck driver shortage, due to a lot of attrition and new rules taking effect and the pandemic impacting driver training.  We are now at the tail end of that, where we are seeing a capacity tightness, and that is also driving rates up.”

As for fourth quarter prospects, Holland said there was cautious optimism, due to forecasts of possible increased positive COVID-19 cases, with flu season approaching, which could result in putting conditions back where they were in the middle of the second quarter. 

“On the other hand, we are going into the holiday season, and consumers are spending money, even if it is all online,” he said. “There is plenty of inventory now, and we stay open, there will be improvement over these third quarter numbers.”