Q4 U.S. Bank Freight Payment Index shows annual freight shipment and spending declines

The fourth quarter edition of the U.S. Bank Freight Payment Index, which was released this week, again showed declines, for freight payments and expenditures.

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 $46 billion in 2022 for some of the world’s largest corporations and government agencies.

The report’s fourth quarter shipment index value, at 95.0, was down 10.9% compared to the third quarter and down 15.7% annually, with the latter marking the largest shipment decline since the index has been published. Regionally, the report noted that the steepest annual shipment declines were in the Southeast (down 25.4%), Northeast (down 23.8%), and out West (down 16.3%), followed by the Southwest and Midwest, which fell 15.9% and 8.9%, respectively. What’s more, fourth quarter shipments in all regions were off sequentially, for the second time since the first quarter 2021, as was also the case in the third quarter 2023.

On the spend side, the report observed that the fourth quarter reading, at 233.9, fell 13.5% annually and was down 1.4%, from the third quarter to the fourth quarter.

On a regional basis, spend out of the West was down 17.0% annually in the Midwest (up 1.2% sequentially), followed by the Northeast, down 12.5% (down 2.5% sequentially), and the Southeast down 11.4% (down 4.1% sequentially). The Southwest and West regions were down 10.4% (down 2.7% sequentially) and 7.4% (up 0.2% sequentially), respectively.

The report’s author, Bob Costello, senior vice president and chief economist at the American Trucking Associations, noted that one of the reasons why freight volumes were so soft in the fourth quarter was that retailer inventory reduction was significant during the final three months of 2023.

“As businesses worked to reduce inventories, they required fewer truck shipments,” he observed. “Furthermore, shelf destocking reduces total economic activity; the reduction in inventory, once completed, will no longer be a headwind on the freight supply chain. Bringing inventories into balance will be better for motor carriers in the months and quarters ahead as retailers and other businesses will require additional products to be delivered by trucks and can’t simply pull from existing inventory. As shipments volumes contract, it results in too many trucks chasing too little freight.

While this situation may drive lower shipping rates, it can also have a significant negative impact on motor carrier supply. For example, while the number of truck freight shipments declined 10.9% from the third quarter, spend only fell 1.4%, suggesting that the market may be moving closer to balance between supply and demand. This will be something to watch for in the first half of 2024.”

Looking at spending, Costello explained that the annual and sequential declines were not as large as the volume declines, noting that this suggests that there were some reductions in freight capacity in the industry, keeping costs higher.

“Motor carriers, especially those exclusively in the spot market, have been under tremendous pressure between falling freight rates and rising costs,” he said.