Cowen/AFS Freight Index lays out Q1 expectations for TL, LTL, and parcel

The new edition of the Cowen/AFS Freight Index, which was released today by New York-based investment firm Cowen Inc. and Shreveport, La.-based 3PL and freight audit and payment company AFS Logistics LLC, was in line with expectations, for truckload, less-than-truckload (LTL), and parcel activity, from the third quarter to the fourth quarter.

The index made its debut in October 2021. The companies said that the objective of the quarterly Freight Index is to provide institutional clients of Cowen with predictive pricing tools for various sectors—including less-than-truckload (LTL), full truckload shipping (TL), and parcel shipping (separately focusing on express and ground).

The companies explained that the by leveraging AFS’s access to freight data across various modes, coupled with applying advanced analytics like machine learning algorithms, they have developed models that they said provide a complete picture of the data’s depth and richness. And they also highlighted how along with the large amount of historical data, they are evaluating and selecting current macro- and micro-economic factors, which are built into their historical models, which includes the most recent GRI (general rate increase) announcement from a major parcel carrier. What’s more, Cowen and AFS noted that the Cowen/AFS Freight Index “offers a unique and comprehensive review of both past performance and the forecasted outlook for the immediate future quarter.”

The Index issued the following takeaways across the modes it covers:

• Fourth quarter truckload volumes fell 13.7% annually, with linehaul cost-per-shipment up 1.5%, for the same period (meeting previous estimates), down 4.2% compared to the third quarter, with overall miles per shipment down 2.5%, from the third quarter to the fourth quarter. Truckload rates per mile are pegged to come in at 11.2% in the first quarter (2.1% below the fourth quarter), due to macroeconomic conditions, and be down 11.6% annually. The index observed that with inflation-driven cost increases, relatively high fuel costs, and shippers having pricing power, 2023 is expected to be a tough year for truckload carriers’ profitability;
• First quarter LTL rate per shipment is estimated to hit a new high, coming in at 66.5% above the January 2018 baseline, for a 1.1% increase over the fourth quarter and a 20.4% annual gain. With fourth quarter weight per shipment flat, the index noted that a 4.9% gain in accessorial charges per shipment, coupled with a greater percentage of shipments rated class 85 or higher, drove a 1.3% cost per shipment gain, from the fourth quarter to the first quarter, as well as expected first quarter rate pressure stemming from LTL GRIs, going into effect this month, ranging between 4.9%-to-7.9%; and
• While average billed weight per parcel package was down in the fourth quarter, the index observed that an 8% increase in average weight per package paced cost per package growth, with the first quarter rate per package index pegged to hit a record-high, at 34.9% over the January 2018 baseline, up from the fourth quarter’s 27.7% reading (and expected to be led by the trio of continued accessorial charges, fuel surcharges expected to remain moderately high, and record-high GRIs. And it added that the first quarter express parcel rate per package is pegged to rise 2.7% above the January 2018 baseline in the first quarter, with a 1% gain, from the third quarter to the fourth quarter, and a 5.9% annual gain

“Predictions for truckload and parcel fall in line with conventional wisdom, as truckload is typically sensitive to macroeconomic headwinds and record GRIs join year-round demand surcharges to drive higher parcel costs, particularly in ground,” said Tom Nightingale, CEO, AFS Logistics, in a statement. “But what the index says about LTL may surprise some. Unlike truckload, LTL is expected to exhibit strength in the face of economic headwinds, supported by higher accessorial charges and GRIs, even as market conditions trend more favorably for shippers. Seven interest rate hikes since March of last year and continued inflation have taken a significant bite out of economic demand. While the index does not show a uniform decline across all modes, looking deeper shows the effects of macroeconomic conditions playing out, with carriers competing for more limited demand while searching for ways to claw back revenue.”