Economic uncertainty delays truckload market breakout

Chart of the Week: Outbound Tender Reject Index, National Truckload Index (linehaul only) – USA SONAR: OTRI.USA, NTIL.USA

The truckload market remains poised for a breakout, but the timeline appears to be extending. Analyzing the trend line of tender rejections (OTRI) and spot rates excluding fuel (NTIL) over the past two years reveals a clear upward trajectory with increasing volatility. However, this trend flattened in the first five months of the year, as economic uncertainty continues to dampen demand.

The trucking sector is enduring one of its longest and most challenging economic stretches since deregulation. Truckload demand is currently down approximately 30% from its COVID-era peaks. While those peak levels were never sustainable, they lasted long enough to inflate capacity far beyond what the market required. 

Slow capacity correction

From June 2020 to October 2022, the number of active truckload operating authorities grew by roughly 48%. Since then, they have declined by only about 12%. Federal Motor Carrier Safety Administration data is slow to reflect these changes, as it can take up to two years to clear inactive authorities unless operators self-report their exit. Carrier Details helps refine this timeline to around a year, but it still lags. Importantly, one authority can represent a single truck or a fleet of a thousand, so this metric isn’t evenly distributed.

Tender rejections serve as a reliable proxy for market balance. Carriers are unlikely to reject freight in soft markets unless they have alternatives, so rising rejection rates indicate tightening capacity and strained networks.

Capacity has been in correction mode for years and seemed close to reaching equilibrium late last year. Over the holidays, the OTRI exceeded 10% for the first time since 2021. This occurred even as shippers increasingly turned to intermodal for longer hauls, taking advantage of early inventory pull-forwards that gave them more flexibility in shipping.

The trade war effect

The ongoing trade war has further fueled the inventory pull-forward phenomenon. After briefly cooling in late April and early May, tariff activity resumed, sending mixed signals and triggering repeated shifts in shipping behavior.

Import bookings data shows a surge in container volumes bound for the U.S. last summer, followed by erratic swings. Container imports can be a useful demand proxy, but they often give false signals during periods of uncertainty — something that has plagued shippers since COVID.

Import demand remains relatively high, but much of the freight is precautionary. With trade policy and consumer spending still in question, a significant portion of freight is sitting idle in warehouses rather than moving on trucks. 

Economic headwinds

The economy seems to be stalling, if not slowing outright, as business investment weakens. This protracted trade policy uncertainty is unprecedented, leaving businesses without a playbook.

Hiring has slowed, and layoffs are rising. Initial jobless claims have increased since January after declining through the latter half of 2024. While aggregate figures remain historically healthy, the trend is concerning. If the labor market continues to deteriorate, consumer spending could contract further. Combined with persistent inflation and reduced investment, these factors suggest a stagnating economy.

A shift in market balance

The fact that rejection rates have stayed above 6% since International Roadcheck in mid-May — despite underwhelming demand — should be seen as a positive signal for carriers and 3PLs. Demand conditions are actually weaker than in mid-2023, when excess inventory caused order slowdowns and pushed OTRI below 3%.

This suggests a meaningful amount of capacity has exited the market, with more likely to follow as demand remains soft. While the outlook isn’t bright for all stakeholders, it does indicate that the imbalance between truck supply and freight demand has narrowed.

Shippers should take note: The market is primed for a sharp reaction if macroeconomic conditions improve. Even if they don’t, transportation is likely to become more challenging going forward, even if not dramatically so.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

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