U.S. Bank Freight Payment Index: Shipments, spending continue growth streak in Q4

January 27, 2021 | GET MORE : Articles

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The freight industry continued its growth streak in the fourth quarter of 2020, with solid gains in both the number of shipments and the amount spent by shippers.

The Q4 2020 U.S. Bank Freight Payment Index, a quarterly analysis of national shipments and spend, showed that shipments in the fourth quarter of 2020 increased 5.3% (vs. a gain of 6% in the third quarter of 2020) and an increase in spending of nearly 20% (vs. an increase of 14.6% in Q3 2020).

The gains in the second half of the year came on the heels of three consecutive quarters that showed a downturn in both shipments and spend – largely due to the impact of COVID-19 on economic activity. 

Shipment Index 

After rising 11.3% during the second half of the year, the U.S. Bank National Shipment Index – up 5.3% -- was at its highest level since the third quarter of 2019. 

The increase can be attributed to robust growth in certain parts of the economy, including record levels of shipments for e-commerce and retail goods, and an increase in the shipment of construction materials for new homes (driven by low mortgage rates). However, some sectors of the economy are recovering more slowly, including energy production and manufacturing, which tempered growth.  

Spend Index 

The U.S. Bank National Spend Index was very strong during the last quarter of the year, surging 19.7% -- a 14% increase from the fourth quarter of 2019 – the largest year-over-year gain since Q2 2018. 

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. Much of this was driven by record levels of consumer spending online for goods to be shipped to their homes. 
  • Driver shortage: The number of qualified drivers has plummeted. Far fewer drivers were trained in 2020 (vs. 2019) due to COVID-19 (schools closed or reduced services; social distancing rules), and new federal rules for drug and alcohol are having an impact on the freight transportation job market. 
  • Higher pricing: Demand for carriers to move goods significantly increased, and with fewer drivers to deliver those goods, pricing for contract and spot market freight went up. Spending for shippers, and revenue for carriers, hit an all-time high.  

Regional Data 

For the first time since the third quarter of 2017, every region posted gains in both shipments and spend during the final quarter of 2020. Rates also increased significantly in every region, and increases in spending were significantly larger than increases in shipments.

  • Southeast: The Southeast continued its strong performance during the fourth quarter and was by far the best region for all of 2020. Shipments were up 7.2% in the quarter and 9.1% overall in 2020 vs. 2019. Robust auto production drove volumes, and, combined with rate increases, pushed the spend index up by 23.1% in Q4 2020. 
  • West: Shipments rose 7.2% in the quarter (vs. an 8.8% increase in Q3 2020), driven by a demand from retailers for imported consumer goods from Asia for the holidays and to replenish inventories. The spend index surged 25% over Q3 2020 – the largest increase in any region.
  • Midwest: Shipments were up 4.6%, driven by improving manufacturing freight volumes. Spending was up 16.1%. Compared with the final quarter in 2019, spending was up 5.2%, the first year-over-year increase in two years. 
  • Southwest: Shipments were up just 2.7%, but still a gain over Q3 2020 (which grew just 0.5%). Truck-transported trade from Mexico and increased single-family housing starts helped volumes. Spending grew more quickly, up 13.5% (vs. 12% in Q3 2020). When spending by shippers increases significantly more than shipments, it reflects higher pricing for truck freight services.
  • Northeast: Impacted by slower factory activity and energy production, the freight recovery in this region was the slowest of all regions – up 1.3% in Q4 2020 and just 3% in the second half of the year. Spending was up 14.9% in Q4 2020, which points to fewer trucks to move goods. 

“Parts of the economy are doing really well,” said Bobby Holland, U.S. Bank vice president and director of Freight Data Solutions. “Many Americans did not go on vacation or spend money on dining out and instead spent money online. The retail and e-commerce sectors are fueling the recovery and tightening capacity in the process. Other parts of the economy are still struggling – including manufacturing activity and the transport of goods related to energy production.” 

Bob Costello, senior vice president and chief economist for the American Trucking Associations, said, “In preparation for 2021, carriers are continuing to raise pay for drivers to help address the driver shortage. We also are seeing many carriers buying new trucks to turn over older fleets but also to recruit new drivers.” 

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 $29.7 billion in 2020 for some of the world’s largest corporations and government agencies.