The last 12 months have truly been a "Frankenstorm" for truckload capacity, and conversely truckload rates. (for more on the Frankenstorm of 2018, read an article I published in FEB 2018: www.linkedin.com/pulse/north-american-truckload-frankenstorm-2018-jason-ickert). The US Census Bureau estimated the Gross Domestic Product (GDP) growth for Q2 at 4.2%. This is significant because when the GDP is above 4% freight volumes increases and trucking capacity gets tight. Over the next couple of months, indicators show a cyclical increase in consumer demand (i.e. peak season shipping) although not as strong as predicted because of forward stocking by retailers, but none the less will likely tie up capacity into early December.

We are already seeing signs, however, that the truckload market is entering a cooling period, and capacity is freeing up. FreightWaves, the leading go to source for information about the freight markets, has measured the current outbound tender rejection index at about 9,726, on a basis if 10,000 set in March 2018. This is down from a high of 11,080 in late June of this year.

Additionally, FreightWaves data shows that rate tender rejections are currently at their yearly low. This means that more carriers are accepting loads for contract rates on the first tender, and is a sign that capacity has returned to the market. A motivating factor may be that the market added about 31,000 drivers (a 2% increase), but as likely is a cooling both in temperature (think outdoor construction) as well as in the industrial economy, which drives a lot of the infrastructure and equipment related transportation.

For shippers, this means that there is greater supply and less demand. Expect freight rates to fall.

To mitigate their exposure to the capacity crunch, many shippers have already begun, and perhaps have already signed their 2019 rate agreements. For those who haven't, there is a fantastic window of opportunity to leverage what the economists have already predicted, but your carriers, 3PLs and freight brokers haven't told you.

The US has experienced the slowest and longest recovery since the middle of the last century. Since our economic pattern is considered cyclical, we can expect that what goes up, must come down. Barring a black swan event, the prediction from leading economists is that 2019 will mark the beginning of a shallow recession as GDP growth begins to rationalize.

As economic growth continues but begins to cool, extra equipment and additional drivers that have entered the freight market will create more capacity. Additionally, FreightWaves has predicted that a rollback of FMCSA rules (aka de-regulation measures) that are being fastracked, could ease capacity by another 5-6%. As a result, freight rates will fall as carriers start chasing lower paying freight to keep the wheels turning and revenue generating. Expect freight market capacity similar to what we experienced in 2015 when we had slowing industrial production and retail inventory surplus from 2014.

If you haven't yet signed your 2019 freight contract, its not too late to re-negotiate. Don't believe the hype that your carrier, 3PL or broker wants you to believe. The market won't return to 2009 or even 2016 rates, but it is cooling, and you can use the leverage to your advantage to negotiate.