Shipments, spending increase in Q3 as demand for household goods rises and truck capacity tightens

The U.S. Bank Freight Payment Index is a quarterly analysis of national shipments and spend

The freight industry showed solid gains in the number of shipments and amount spent by shippers in the third quarter of 2020 after three consecutive quarters that showed a downturn in both shipments and spend. 

The Q3 2020 U.S. Bank Freight Payment Index, a quarterly analysis of national shipments and spend, shows that shipments in the third quarter of 2020 increased 6% (compared to a drop of 7.6% in the second quarter of the year), and spend was up 14.6% (vs. a decline of 13.7% in Q2 2020). 

Shipment Index 

The U.S. Bank National Shipment Index increased 6% from the second quarter of 2020 – the largest quarterly gain since the second quarter of 2019. 

During the summer and early fall (July, August and September), demand across the U.S. surged for household goods – items for home-improvement stores, grocery stores, and e-commerce – which resulted in an increase in the amount of goods shipped. In addition, retail inventories became depleted over the summer and retailers needed more goods to restock, which also gave carriers a boost. 

However, some parts of the industry, particularly tanker trucks – 60% of which haul energy or chemical products – continued to struggle as a result of lower energy consumption and production, as well as soft chemical output. 

Spend Index 

The U.S. Bank National Spend Index improved 14.6% from the second quarter of 2020. Despite the increase, the spend index was off 7.3% from a year earlier. This is due to the COVID-19 overall impact on economic activity, which impacts freight.

The increase in spending in the quarter was due to several factors: 

• Higher freight volumes: Shippers saw more demand for their products, and freight carriers had more goods to move.  
  
• Higher pricing: As demand for carriers to move goods significantly increased, pricing for contract and spot market freight went up.   
  
• Tighter capacity: For-hire fleets operated fewer trucks, and the return of the truck-driver shortage (and difficulties training new drivers due to social-distancing requirements) meant higher freight rates across the U.S.  
  

Regional Data 

Shipments were up in all regions except the Southwest during the third quarter. Spend was up double digits in all regions but one, led by a more than 21% increase in the West.

• Southeast: This region was the strongest during the third quarter, showing gains in both shipments (up 12.5% vs. Q2) and spend (up 18.6% in Q3). Factories restarted production, and home building and consumer spending in the region increased. Freight also rose in preparation for an active hurricane season.
  
• West: Shipments in the West rose 8.8% during the third quarter after falling 1.8% in Q2 and 14.5% in Q1. The increase came from improved retail sales, higher housing starts, and better import volumes into West Coast ports. Spend in the region was up as well, increasing 21.7% from the second quarter.  
  
• Midwest: This region, one of the hardest-hit over the past two years, showed modest increases in shipments – 2.5% over the second quarter, the first increase in five quarters – and an 8% increase in spend. The spike in COVID-19 in some Midwest states likely hurt shipment volume. In addition, fewer trucks were available to move goods due to a driver shortage, resulting in increased spend by shippers to move goods. 
  
• Northeast: This region slowly reopened during the third quarter, which drove increased consumption and freight volumes. Shipments were up 1.7% over the previous quarter but were still down more than 23% vs. a year ago. Spend in the region was strong, up 12.1% from Q2, driven by freight rate increases. 
  
• Southwest: The only drop in shipments was in the Southwest, where volumes dipped 0.5% from the previous quarter and 10.4% vs. a year earlier. One of the factors continuing to decrease volumes is lower energy production due to weak demand worldwide. However, spend in the region was up 12% vs. last quarter as rates  rose in response to tighter capacity.  
  

“We are seeing a K-shaped recovery – when different parts of the economy recover at different rates,” said Bob Costello, senior vice president and chief economist for the American Trucking Associations. “Sales at grocery stores and home improvement stores are strong, and home construction is robust. But other sectors – travel, entertainment and oil production – are down.”

“We are now entering the busiest time of the year – a lot of freight is moved from the end of September into December in the rush to get stock to the stores for the holidays,” said Bobby Holland, U.S. Bank vice president and director of Freight Data Solutions. “With even more freight to be hauled, it should be a solid peak season for both shippers and carriers.”

To see the full report including in-depth regional data, visit the U.S. Bank Freight Payment Index website. 

For more than 20 years, organizations have turned to U.S. Bank Freight Payment for the service, reliability and security that only a bank can provide. The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment. The business processed more than $28.8 billion in 2019 for some of the world’s largest corporations and government agencies.