Freight Payment Index: Shipment, spend indexes reflect an economy in recession

July 22, 2020 | GET MORE : Economic Trends

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U.S. Bank has more than 20 years of payment expertise in the freight industry

As much of the U.S. remained in lockdown mode during the second quarter of 2020, the freight industry saw a significant downturn in freight shipments and volume. 

Shippers saw demand for their products fall, freight carriers had fewer goods to move, carriers were paid less to move goods, and carriers made less on fuel surcharges as the price of diesel dropped.

The Q2 2020 U.S. Bank Freight Payment Index, a quarterly analysis of national shipments and spending, shows that shipments in the second quarter of 2020 fell 7.6% (compared to a drop of 1.8% in the first quarter of the year), and spending fell 13.7% (vs. a decline of 3.7% in Q1 2020). 

One bright spot, however, was in the Southwest. When stay-at-home orders in Texas expired on April 30 and border states saw more freight moving across the southern U.S. border, this region saw a small gain in shipments (1.3%) in the first quarter. This could indicate that the freight industry could recover quickly as the economy begins to rebound.

Shipment Index 

The U.S. Bank National Shipment Index fell 7.6% in the second quarter – the second largest year-over-year decrease since 2014. 

Although the Southwest saw a small gain in the number of shipments during the second quarter, shipments were down significantly in the Southeast and Northeast. New York, New Jersey and Massachusetts were all hit hard by COVID-19 for a majority of the second quarter, which caused freight levels to decline. 

Spend Index 

Spending also fell during the second quarter, decreasing 13.7% from the first quarter and 19.4% year-over-year.

Spending fell sequentially in all regions during the second quarter due to:

  • Lower freight volumes: Shippers saw less demand for their products, and freight carriers had fewer goods to move. 
  • Lower pricing: Pricing for contract and spot market freight fell. With less freight to move, carriers had to compete for freight and offer lower prices. 
  • Lower fuel prices: The price of diesel was nearly 16% less than in the first quarter – meaning shippers paid less in fuel surcharges. 
Regional Data 
  • Southwest: After contracting in the last two quarters, the Southwest Shipment Index rose 1.3% during Q2. This was the only region to post a sequential gain in shipments in Q2. This region saw more economic activity than other regions, but despite the increase in shipments, the spend index contracted 14.2% from Q1 2020 and more than 20% from a year earlier due to softer pricing and lower fuel surcharges. 
  • West: Shipments fell just 1.8% after dropping 14.5% in the first quarter. This can be attributed to California flattening the curve in May and June, which resulted in an increase in economic and freight activity. The spend index fell 7.5% in Q2 due to slightly lower volumes, lower fuel surcharges and lower pricing. 
  • Midwest: Shipments fell 5.5% sequentially in Q2, while contracting 13.5% from 2019. Soft manufacturing activity and the trade war with China continue to hurt both carriers and shippers in this region. Spending fell 11%. Although factories in the region are ramping up production, China is not buying as many factory goods or agricultural products as they committed to buy in the U.S./China trade deal. 
  • Northeast: Shipments contracted 12.6% from the first quarter. This region was hard hit by COVID-19, with stay-at-home orders in some states that lasted longer than in other states. The spend index was down 12.7%, due more to decreasing volumes than lower pricing. 
  • Southeast: In Q1 this region was the only one with increases in both shipments and spending; however, in the second quarter both of those indexes fell significantly. Shipments were down 14.1% (after a 10.5% increase in Q1), and spending was down 21.4%. The region is still struggling with spikes in the number of positive COVID-19 cases. 

“While the COVID-19 impacts to the industry were as severe as expected, the regional breakdowns show that the industry, like the economy, can rebound as restrictions continue to loosen,” said Bobby Holland, U.S. Bank vice president and director of Freight Data Solutions. “The Southeast region activity shows this.” 

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