How tight is the need for trucking to move goods nationally? About the tightest on record. In the chart below we can see that trucking is in high demand almost everywhere nationally.
Currently the Load to Truck Ratio is significantly greater than 2017 and 2018 when we had 3% GDP growth.
The C.H. Robinson L/T Ratio is not the only indicator providing a view into trucking. The Cass Freight Indices are also showing major gains and strength.
The Cass Shipments Index chart above shows that on both a numeric and seasonally adjusted basis, we arere at shipping levels of early 2018 in March 2021 and demand is growing. At that time, companies were increasing trucking to meet the increase in economic growth, plus the prospect of possible trade fights with China that compelled companies to increase their normal warehouse inventory levels to meet potential disruptions.
In the chart below, we see that these increases come with increased cost.
According to the Cass Expenditures Index chart above we are seeing expenditures rise at some of the fastest rates since the 2009 recovery began. We believe that there are a number of reasons for this; the Covid pandemic allowed for trucking companies to operate under relaxed Department of Transportation guidelines and that meant increased hours between routine maintenance leading to more breakdowns and maintenance now, the change in output under some government orders that has decreased parts availability nationally for all tranportation types, and the uneven re-opening by states that can pull trucking or specific types of trucking away from where it is needed most.
We expect that this will lead to higher prices due both to rising costs in trucking and transportation, but in numerous other areas as well. In fact, the USDA has noted that food prices are up between 3.1-3.3% over the prior year, and trucking is tightest where current agricultural production is highest at this time of year. We suspect that food prices will go higher for a time. (https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/)
Trucking affects virtually every part of the production and delivery chain. When trucking costs increase, costs in general tend to increase.
*This is the first part in a series of why we think inflation and interest rates are headed higher.