The recent fluctuations in the freight industry have a lot of logistics professionals scratching their heads. Freight rates have fallen, and The Logistics Managers’ Index (LMI) noted the fastest transportation rate decline in 6.5 years during February. The LMI was 54.7 in February, down (-2.9) from January’s reading of 57.6.*
What is the cause of the fluctuations in the freight forwarding market in 2023?
A lot of factors can impact shipping rates.
- Supply and demand
- Changing fuel prices
- Number of drivers available
- Delivery distance
- Weight and size
- Type of delivery service
- Weather and other unpredictable disruptors
The first quarter of 2023 certainly faced weather disruptions among other challenges. And even though average national retail price of diesel declined for the fifth consecutive week by 1.2 cents per gallon to $4.282, wholesale prices have been rising. And the European Union implemented more restrictions on Russian diesel exports in February which causes some uncertainty about the impact of that change.** According to the Cass Freight Index data, there is an increase in the proportion of truckload (TL) freight over the past several months, suggesting freight is migrating to TL from other modes.
Economic activity has also had an impact on freight rates, with several areas experiencing significant recessionary pressures in the past few years. According to FreightWaves, “A healthy number of industry analysts predict that consumer demand for goods will return in the second half of 2023, spurring truckload volumes and returning a bit more balance to the market.” Consumers are still spending in spite of high inflation. And January of 2023 surpassed expectations and saw high retail sales and consumer spending.
Overall, the freight market is in a state of flux, and the only way to take advantage of the current market is for businesses to be flexible and agile with their freight operations. We are right around the corner from some key produce season months for certain parts of the country. The key to success is to leverage data insights to stay ahead of the changes, adjust to customer demands, and manage pricing effectively to optimize profitability.
Hawkeye transportation experts can help you evaluate all your options and coordinate all the details for you!