Supply Chain Pulse Check: High rates, unshaken demand

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Supply Chain Pulse Check: High rates, unshaken demand

ng, but potential for further tightening from the oil component is in flux given Middle

East peace talk developments. Elevated oil (may or may not hold, but elimination of financially struggling carriers = less fleeting

positive impact) / capacity reads bullish for trucking / domestic intermodal. Recent signs of slight demand uplift could persist and

provide some boost to the supply-side muscle, though we expect that this will remain a supply-driven story for some time, as more

consumer-oriented demand components like housing still look quite weak (e.g. housing starts dipped -8.7% YoY in May to 1,177

and missed economists’ estimates that had expected +10.9% YoY growth).

Spot TL rate ex. fuel YoY growth continues to surge mostly on supply-side tightness, some glimmers of hope on the

demand side. Supply constraints are still driving up rates: spot TL rate ex. fuel is +48% YoY so far this month, well above the

already high +34% YoY growth seen in May and the ~ +20-25% YoY over the prior 3 months. Enforcing existing regulations

(language, domicile, operating domain, hours of service, training) and higher fuel are all factors at play. The recent SCOTUS

ruling on broker liability should, over time, put further downward pressure on capacity but don’t expect too much too fast. The

impact will eventually be significant, but it may take time to work its way into rates. Issues are structural and bullish for U.S.

surface transport rates. Should drive consolidation in brokerage, but a net negative on customer behavior and buy rates. While

this has mostly been a supply story, there have been some more recent signs of demand uplift starting to unfold too, including