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Morgan Stanley Proprietary Truckload Freight Index Update

Wednesday June 23, 2010

Morgan Stanley Proprietary Truckload Freight Index provides a periodic update of real-time
changes in the truckload supply/demand balance as measured by our proprietary truckload Freight Index.

What’s New?
As of June 26, the improvement in our proprietary index has stopped. Readings have trended lower in recent weeks, even when adjusted for seasonality, and remain at all-time lows for June. Signs of a June swoon emerging for truckload carriers. While the broader market has
focused on incremental improvements in April and May data points, June could be a stark
contrast. Remember that gasoline prices are up 20 percent since May (35 percent since April), and the resulting fallout may be weighing on consumer spending and truckload demand. Similar to the ATA’s latest seasonally adjusted (SA) tonnage data, our index reported a bottom in the dry-van truckload market in April with marginal improvement in May. However, with trends in our index deteriorating throughout June, Ross expects to see some slowing in the pace of
improvement, or even a decline, in the June SA truck tonnage numbers.

We worry that consensus may be too optimistic about a near-term recovery in the TL market.
We continue to believe a slow recovery will produce a more muted truckload cycle (see our June 11 report, Truckload: Cyclical Upside, but Secular Disappointment), and the latest trends in our index only give us greater conviction. Carrier cost control could certainly surprise in 2Q09, but given the new weakness in June, utilization and pricing may come in below expectations (we expect rate declines to trough in the 2nd and 3rd quarters.


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