Q4 U.S. Bank Freight Payment Index shows ongoing gains to close out 2020

Fourth quarter freight shipment and spending levels continued where the third quarter left off, with strong sequential and annual gains, 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 the report’s shipment and spend gains, for the fourth quarter, reflected solid improvement in both the full truckload and less-than-truckload markets over the course of the fourth quarter. And he cited e-commerce purchases (paced by the ongoing COVID-19 pandemic), retailer demand, and single-family home construction driving the indexes higher, whereas sectors like manufacturing and energy were at lower levels.  

“While freight volumes improved, the truck freight market remained tight,” wrote Costello. “This is best highlighted by the upswing, both sequentially and from a year earlier, in the National Spend Index. With spending by shippers increasing significantly more than shipments, it reflects a market where pricing for truck freight services rose during the final quarter of the year.”

Key factors related to ongoing trucking market tightness cited in the report included: recruitment, retention, and training of truck drivers, among others.

The report’s fourth quarter National Shipment Index—at 128.1—was up 5.3% compared to the third quarter and up 1.3% annually. This is slightly below the 6% increase, from the second quarter to the third quarter.  

On the spending side, the report’s fourth quarter spend index—at 222.36—was up 19.7%, from the third quarter to the fourth quarter, and was up 14.0% annually. The sequential gain nearly was below the 14.6% increase from the second quarter to the third quarter.

Costello also observed that some fleets are reporting decreased capacity from drivers either contracting COVID-19 or being exposed to the virus from family or friends and needing to quarantine. What’s more, he also noted that it is likely that a modest—but not insignificant—number of carriers left the market, not because of the pandemic but because of surging liability insurance premiums.

On a regional basis, the report stated that fourth quarter shipments largely saw gains on a sequential basis, with the West up 7.2%, Southwest up 2.7%, Midwest up 4.6%, Northeast up 1.3%, and Southeast up 7.2%. Annually, shipments were down 2.2% out West, down 10.4% in the Southwest, down 0.7% in the Midwest, up 14.4% in the Southeast, and down 16.2% in the Northeast.

On the spending side, the report stated that fourth quarter spend saw gains on a sequential basis, with the West up 25.0%, Southwest up 13.5%, Midwest up 16.1%, Northeast up 14.9%, and Southeast up 23.1%. Annually, spend levels were up 26.2% out West, up 6.9% in the Southwest, up 5.2% in the Midwest, up 21.1% in the Southeast, and up 3.5% in the Northeast.

U.S. Bank Freight Data Solutions Director Bobby Holland said in an interview that when looking at the third quarter compared to the fourth quarter, much was dependent upon the trajectory of the re-openings of certain parts and regions of the economy.

“When you see how that played out in the fourth quarter, most places had, at least, a partial re-opening,” he said. “There are some places even today are still partially locked down, but generally everywhere is much more open than compared to mid-2020…when things got moving.”

Addressing the strong spending levels, from the third quarter to the fourth quarter and annually, Holland said that those readings were in line with expectations.

“If you look at the decisions people made based on all of the different things going on in the country, one of the most surprising things was that housing starts were so strong,” he said. “We saw indications of that anecdotally, with stimulus money and people are spending more on housing and housing-related items, as they don’t know how long they will be working from home. Housing starts are up dramatically, and that pushes up freight levels as well.

With spending outpacing shipping in the fourth quarter, Holland said that indicates and supports the notion that there is a driver shortage and capacity tightness, due largely to the pandemic, and was also reflected in the regional spreads in the report, too.