Truckload capacity correction will last deep into 2023
The Contract Load Accepted Volume Index (CLAV), which measures accepted truckload tender volumes, is 25% lower than the peak values in 2021. With rejected tenders being near historic highs at that point, we can assume this was the limit to the amount of volume carriers could handle.
Considering exits are just now starting to outpace entrants, according to recent Federal Motor Carrier Safety Administration data, 25% may be a smidge low after a year of new authorizations. How long will capacity take to be more in line with demand?
Even with demand remaining relatively unpredictable, there are no reasons to expect a significant stimulus event in the near future. The Fed is still fighting inflation with interest rate increases and has signaled that it has no reason to think its job is done.
The only macroeconomic indicators with any real strength in them have been the jobs market and revolving credit (credit card debt) dollar amounts, the latter of which being a negative sign for future consumption.
There are far more reasons to expect weakening demand rather than strengthening in 2023, which means trucking operators have to play a waiting game as to when some form of pricing leverage will return. That being said, freight demand is far more fickle than capacity shifts and needs to be monitored more closely even though there appears to be a significant buffer.