The Freight Holiday Comes to an End


The holiday season is always a volatile time in the spot market. Spending on consumer goods spikes in November and December, and both manufacturers and retailers accelerate orders and shipments in response. The rest of the winter tends to be a relatively slow time of year in the world of freight, so this seasonal anomaly is gratefully received by freight carriers and brokers. This temporary increase in activity typically lasts until the first week of the New Year, before burgeoning load postings and rates are curtailed by a return to more normal winter patterns.

For a brief moment this year, it seemed as if the holiday surge may have been the catalyst for more sustained growth. The anticipated weekly decreases that usually follow the holidays were either much smaller than expected, or were replaced with modest increases in activity. Truckstop.com’s Market Demand Index (MDI), which shows changes in demand for trucks and trailers by calculating the ratio of available loads in the market to available trucks, rose to more than 20.0 during the week of Christmas, up from 17.8 the week before. The MDI grew again during the last week of the year, to 20.4, and then surprised the industry when it grew once again in the first week of 2017, by nearly 4%.

total-mdi

This was the strongest observed growth for the first week of a new year, in the history of the index. Typically, the first week of a new year is either flat, with growth of less than 1%, or down. As a matter of fact, the index decreased by 22% in the first week of 2016, just one year ago. The second week of the year is categorized as having a seasonal decrease in demand by at least 15%. The MDI did decrease in the second week of 2017, but by a historically modest 7.6%, only half of the expected amount. It almost felt as if the industry would continue growing, in spite of the seasonal trends, and in the face of basic economic theory.

The most recent Market Demand Index data, released on January 23rd, showed that strength in the economy and in the freight industry was still, indeed, susceptible to the seasons. The MDI decreased by approximately 19% in the third week of 2017, to 15.8, and overall rates contracted by 2.3%. This was in line with expectations, and indicates a reversion to historic seasonal trends. It is not uncommon to see sluggish growth through the first eight weeks of the year, before spring weather begins to drive consumers out of late-winter hibernation.

In an industry that is evolving as much as the world around it, these types if deviations may continue to occur in unexpected ways. The freight industry is being shaped by those with access to the best data. When you know that the ground is moving under your feet, you can begin anticipating that movement and tread a little smarter.

To learn more about the data used in this post, visit Trans4Cast.com.