Q1 forecast: Truckload rates likely to rise but not skyrocket
On Monday, RXO recently released its Q1 2025 Truckload Market Forecast, with its Curve Index showing a continuation of rate inflation first observed in Q4 2024. The Curve, formerly the Coyote Curve, is a proprietary index measuring year-over-year changes in truckload linehaul spot rates (excluding fuel). It has climbed steadily higher for seven consecutive quarters. After purchasing Coyote Logistics in September 2024, RXO acquired the data and combined it into a larger dataset.
'The Curve has been a leading index for years — now, as a combined organization, it's going to become even more robust,' said Jared Weisfeld, chief strategy officer at RXO. 'As the third-largest freight brokerage in North America, we have an immense set of data spanning industries, geographies and business sizes.'
The forecast highlighted how rising spot rates and capacity exiting the market are driving the upswing, though the authors caution that the extreme conditions experienced in the last inflationary market in 2020 and 2021 are not anticipated. While shippers may not feel dramatic changes yet, RXO warns that conditions are shifting in ways that could lead to tightening later this year.
The Q4 2024 Curve Index showed spot rates up 11.6% year over year, a jump from the 5.8% increase seen in Q3. This rise was driven by continued carrier exits, impacts from hurricanes Helene and Milton, and typical holiday shipping seasonality.
Contract rates, while still showing a slight year-over-year decline of 1.5% in Q4, moderated from the 3.4% y/y drop seen in Q3. This aligns with typical market behavior, as contract rates tend to lag spot rates by two to three quarters.
'Over the holidays, we saw market rate and coverage KPIs reach levels we haven't hit since Christmas 2022. While we have seen some of those gains moderate through the first quarter to date, the baseline has reset higher,' said Corey Klujsza, vice president of pricing and procurement at RXO. 'Though the rest of 2025 may not look like the peak in the COVID-era truckload market, we're seeing continued signs that we're past the bottom of the cycle.'
The broader U.S. economy remains relatively healthy, with low unemployment and several key indicators moving higher. However, uncertainties loom, particularly around inflation, interest rates and trade policies.
Core inflation, excluding volatile food and energy costs, increased by 3.3% year over year in the latest update, exceeding both market expectations and the Federal Reserve's 2% target rate. This persistent inflation, coupled with potential impacts from recent changes in U.S. trade policy, has driven consumer confidence to a seven-month low.
On a positive note, the industrial sector is showing signs of improvement. The Manufacturing Purchasing Managers' Index entered expansionary territory for the first time since October 2022, with the New Orders component improving for five consecutive months.
Several trends are converging to shape the current truckload market landscape:
Spot and contract rate convergence: After more than two years of discounted spot rates compared to contract rates, the market is shifting. Holiday shipping season saw spot rates hold a premium over contract rates, creating tension in routing guides as carriers sought more lucrative opportunities. The forecast adds, 'Those rates and routing guides set in the softer market of 2024 may not survive a tighter market later in 2025, when the spot market will (likely) become more lucrative than the contract market.'
Private fleet impact: Excess capacity in private fleets, built up during the volatility of 2020 and 2021, continues to absorb freight that would typically hit the for-hire spot market. 'This added a lot of resilience in the form of guaranteed capacity and predictable rates, but with the overall downturn in freight volumes, there has been a lot of slack in the line,' notes the report. This has prolonged the down cycle but may change as shipping volumes increase or the for-hire market further contracts.
Declining truck purchases: U.S. Class 8 tractor sales were down 12% year over year in Q4 2024, reflecting financial strain on carriers and hesitancy to expand fleets amid market uncertainty.
Carrier attrition: Employment data from the Bureau of Labor Statistics shows consistent year-over-year declines in truck transportation employment throughout 2024. The Federal Motor Carrier Safety Administration reported a net decrease of over 3,000 operating authorities in Q4 alone, continuing a trend that has seen more than 50,000 authorities exit the market since 2022.
Looking ahead from Q1 2025, the Curve is expected to continue its inflationary trajectory. While the market may feel relatively stable to shippers in the short term, underlying dynamics suggest more significant changes ahead.
'Though we are in an inflationary rate environment, we don't anticipate the sort of extreme conditions we experienced in the last inflationary market in 2020 and 2021,' the RXO report states. 'Based on recent history and current market dynamics, it's quite possible we'll see a lower potential market peak; for guidance, a look back to 2014 would likely be a better comparison.'
The report advises shippers to be cautious about aggressive rate cutting in the current environment. Short-term gains achieved now could lead to higher spot market costs later in the year as capacity tightens. Additionally, maintaining relationships with core freight providers, even at reduced volumes, may prove crucial when market conditions shift more dramatically.
'We are in an inflationary spot market as carrier attrition continues and spot rates overtake contract rates. This dynamic will create pressure for shippers in the coming months,' the forecast concludes. 'Q1 will not likely feel like a dramatically different operating environment, which is typical given seasonality, but we are in a changing marketplace that is setting us up for a more meaningful flip later in the year.'
The post Q1 forecast: Truckload rates likely to rise but not skyrocket appeared first on FreightWaves.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
Will tariff pressures show up in the Fed's preferred inflation measure?
The Federal Reserve's favoured inflation metric is expected to show a slight tick uptick in price pressures in May, with an acceleration in Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
3 hours ago
- CNBC
5 income-producing stocks to buy for the second half
Uncertainty in the stock market and in the economy may have investors seeking stability in companies that pay regular dividends. Those equities are often seen as a hedge against volatility due to their their reliable income. Stocks fell early last week on concern over the Israel-Iran conflict, but closed marginally higher in the latest five days after the Federal Reserve opted to keep rates unchanged at its June meeting. There could be more volatility ahead after the U.S. bombed three nuclear sites in Iran over the weekend. But for all the attractions of income-producing stocks, not all dividend payers are created equal. To find stocks that may be poised to outperform in the second half, CNBC Pro screened for those in the ProShares S & P 500 Dividend Aristocrats ETF that are rated buy by at least 51% of the analysts covering the stock, and that have at least 10% upside to the average price target, according to FactSet. They also had to have a dividend yield of 1.5% or more, above the S & P 500 average of 1.29%, and covered by at least 10 analysts. Drugmaker AbbVie has a dividend yield of 3.5%, and 15% upside to analysts' consensus price target. The stock is up about 4% year to date. The $328-billion market cap company said earlier this week that its blood cancer treatment, Venclexta, failed to significantly improve overall survival rates in a recent late-stage trial . However, it also said Wednesday its migraine drug, Qulipta, was found in a late stage trial to be superior to a widely-used generic treatment. In late April, AbbVie reported a first-quarter earnings and revenue beat and raised its full-year earnings-per-share guidance. The North Chicago-based company is also investing at least $10 billion in manufacturing in the United States, including four new plants. While its once blockbuster anti-inflammatory drug Humira has seen declining sales since it lost patent protection in 2023, AbbVie has two new immunology treatments, Skyrizi and Rinvoq. Also on the list is Coca-Cola , which has 14% upside to the average analyst's price target and a 2.9% dividend yield. The soft drink giant also topped quarterly earnings expectations in late April and largely reaffirmed its full-year outlook. It called the effect of higher tariffs "manageable," but expects some short-term choppiness tied to trade conflicts. "I think there's going to be some disruption around a number of categories and industries around us, which will have some effect with the consumers," Coke CEO James Quincey said on the company's conference call, "You can see the consumer sentiment has been impacted, [but] the consumer spending ... still seems robust." Shares have risen nearly 11% so far this year. Lowe's is another company that pays an above-average dividend and is sticking with its full-year forecast in the face of tariffs. Investments in stores, customer service and technology have helped the home-improvement retailer navigate "near-term uncertainty and housing market headwinds," CEO Marvin Ellison said in the company's earnings release in May. The stock has 25% upside to the average analyst price target and a 2.3% dividend yield. It has lost 14 % year to date. — CNBC's Amelia Lucas and Melissa Repko contributed reporting.
Yahoo
3 hours ago
- Yahoo
What to Expect in Markets This Week: May PCE Inflation, Powell Testimony, Fed Speakers, Earnings from Nike, FedEx, Micron
Federal Reserve Chair Jerome Powell will deliver testimony to Congress, while other Fed officials are also expected to speak at other events this week. The May PCE report will show whether the Fed's preferred measure of inflation continued its downward trend. FedEx, Nike and Micron are among the firms on the corporate earnings calendar. Investors will also watch for updates on existing home sales, consumer confidence and gross domestic Federal Reserve held interest rates steady last week. Now, Fed Chair Jerome Powell will explain the central bank's views on the economy to legislators when he delivers his regularly scheduled testimony to Congress this week. Central bankers have stood pat as they are concerned inflation will reignite in the wake of tariffs. The Personal Consumption Expenditures (PCE) for May should tell them more when it's released later in the week. Investors will also be watching for updates on first-quarter gross domestic product (GDP), housing market data, and the latest developments in consumer confidence. Earnings from shoe retailer Nike (NKE), package delivery service FedEx (FDX), and chipmaker Micron Technology (MU) come as corporations continue to assess the impact that tariffs could have on their operations. And Tesla's anticipated rollout of its self-driving robotaxi is likely to be on investors' minds this week. Read to the bottom for our calendar of key events—and one more thing. On the heels of last week's Federal Reserve meeting, Powell will testify before Congress to give lawmakers an update on the central bank's views on inflation and the economy. Powell is scheduled to testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. Several other Fed officials are also scheduled to deliver remarks during the week. The hearings could provide some market-moving moments, especially as political allies of President Donald Trump may take the opportunity to grill Powell. Trump has criticized Powell for the central bank's reluctance to lower interest rates, a complaint that could be echoed by some lawmakers. Trump has pointed to lower inflation rates as a reason for the Fed to lower rates. Market watchers will get another look at inflation on Friday with the release of the Personal Consumption Expenditures (PCE) report for May. PCE is important because it's the data the Fed looks at when gauging whether inflation is returning to its target rate of 2%. Inflation has been declining, with the PCE coming in just over the target rate in April. Athletic apparel giant Nike, a member of the Dow 30, will lead corporate earnings this week with its scheduled update on Thursday. The struggling shoe maker warned during its prior quarterly report that tariffs could impact the company, coming as it reported declines in revenue and earnings. But analysts said the recent merger of Dick's Sporting Goods (DKS) and Foot Locker (FL) could help Nike boost sales. FedEx scheduled earnings on Tuesday come as the shipping stalwart warned of lower revenue and profits during its prior quarterly report. Investors watch FedEx earnings because they can provide a view of shipping volumes, which in turn can offer insight into the overall health of the economy, and especially on global trade. Investors will also be watching Micron Technology's scheduled report on Wednesday, which comes after the chipmaker pledged a $200 billion investment to boost semiconductor production in the U.S. Tesla (TSLA) is tentatively scheduled to roll out its robotaxi service in Austin, Texas, on Sunday, June 22, though product updates have been delayed in the past. Expect Tesla's robotaxi to grab headlines and potentially move the EV maker's stock throughout the week, especially if Sunday's launch is delayed. Quick Links: Recap Last Week's Trading | Latest Markets News Monday, June 23 Existing home sales (May) Fed speakers: Federal Reserve Governors. Christopher Waller, Michelle Bowman, Adriana Kugler, New York Fed President John Williams, Chicago Fed President Austan Goolsbee Key Earnings: FactSet (FDS), Commercial Metals Company (CMC), and KB Home (KBH) More Data to Watch: S&P flash Purchasing Managers Index (PMI) (June) Tuesday, June 24 Consumer confidence (June) Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee Fed Speakers: Federal Reserve Gov. Michael Barr, New York Federal Reserve President John Williams, Boston Fed President Susan Collins, Cleveland Fed President Beth Hammack Key Earnings: FedEx, Carnival (CCL), TD Synnex (SNX), and AeroVironment (AVAV) More Data to Watch: S&P Case-Shiller home price index (April) Wednesday, June 25 New home sales (May) Federal Reserve Chair Jerome Powell testifies before Senate Banking Committee Key Earnings: Micron, Paychex (PAYX), General Mills (GIS) and Jeffries (JEF) Thursday, June 26 Pending home sales (May) Fed Speakers: Federal Reserve Gov. Michael Barr. Cleveland Fed President Beth Hammack and Richmond Fed President Tom Barkin Key Earnings: Nike, McCormick (MKC), Walgreens Boots Alliance (WBA) and Acuity (AYI) More Data to Watch: Gross domestic product (GDP) - second revision (Q1), durable-goods orders (May), initial jobless claims (Week ending June 21), advanced U.S. trade balance (May), advanced retail inventories (May), and advanced wholesale inventories (May) Friday, June 27 Personal Consumption Expenditures (May) Fed Speakers: Federal Reserve Gov. Lisa Cook and Cleveland Fed President Beth Hammack Key Earnings: Apogee Enterprises (APOG) More Data to Watch: Consumer sentiment - final (June) The U.S. has a lot of millionaires and is adding 1,000 more every day, more than anywhere else in the world. Investopedia's Nisha Gopalan looked at wealth creation in both the U.S. and around the globe. Read more about it here. Read the original article on Investopedia Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
