New TIA report highlights positive Q3 trends against challenging annual comparisons

The 3PL Market Report Third Quarter 2023, which was issued this week by the Alexandria, Va.-based Transportation Intermediaries Association (TIA) showed some signs of sequential improvement amid still-sluggish volumes and excess trucking capacity.

This report is based on monthly data from more than 50 TIA member companies, focusing on analyzing shifts in broker activity, which it said is largely dominated by the truckload sector. The report was prepared for TIA by FTR Transportation Intelligence.  

A key takeaway of the report highlighted how the GDP Goods Transport Sector reading saw a 6.5% increase, from the second quarter to the third quarter, which snapped a five-quarter stretch of negative or nearly negative sequential quarter growth. And TIA noted that this was in line with the U.S. third quarter advance estimate reading of 4.9%.

TIA President and CEO Anne Reinke told LM that the strong GDP Goods Transport Sector reading is a reflection of consumer spending still remaining steady.

“We were concerned, in a sense, that the pandemic-driven volume craziness—because people were just spending money on consumer goods—would have a deleterious on our members. But we are still seeing consumer spending holding steady. I imagine once these sorts of government transfer payments and things like that are drying up, we may have a kind of cessation of that. The inventories that were too full over 2021 and into 2022 are now starting to ramp up again; there is some inventory spend that definitely drives freight volumes, so those are good things.”

Total third quarter shipments fell 2.2%, from the second quarter to the third quarter, and were off 7.2% annually, according to TIA, with total revenue off 0.2% sequentially and off 19.6% annually. Invoice amount per shipment was up 2.1%, from the second quarter to the third quarter, and down 13.4% annually.

From a modal perspective, the report observed that truckload shipments were down 3.5%, from the second quarter to the third quarter and were down 5.6% annually, with LTL shipments up 3.3% sequentially and down 12.9% annually, and intermodal shipments up 0.9% sequentially and down 20.7% annually.

TIA explained that when looking at the last eight quarters, the fourth quarter 2022 “clearly represented” the market’s downward inflection on the sell side, as average invoice per shipment fell sharply and has since been subsequently steady, with the peak in invoice amounts per shipment coming in first quarter 2022, followed by incremental declines in the following two quarters.

TIA Chair and Chair of the Market Report Mark Christos said that TIA was looking at a tough annual third quarter comparisons, as the third quarter 2022 was strong. And he stated that the positive results in this report can be viewed as encouraging, for TIA members, while there is an expectation for further headwinds until at least the middle of 2024, in the form of sluggish freight volumes and overcapacity.

Reinke explained that with the contract side of the market being fruitful and flexible right now and is where TIA is seeing most of the volumes head.

“The freight broker typically plays more heavily in the spot market, and the spot market has been very weak,” she said. “Will there be some shift [to spot]? Potentially. But I think it is so dependent on the excess capacity once capacity starts to diminish. The reports of small truckers closing down seem to be accelerating. If we see more movement and activity in the spot market and less so in the contract marketplace, yes, I think we will build on the gains there.”

While brokerage activity is down year-over-year, Reinke made the point that there is a greater reliance on brokers, generally speaking, as shippers relied on them during the pandemic to sort out the dysfunction and like the products and services provided by brokers, with their value proposition remaining intact.

When asked about shipments being down sequentially and average invoice amount per shipment being up, for the same period, Reinke attributed it to inflationary pressure on goods more than anything else, which she said is reflected in gross margin for brokers (down 100 basis points sequentially and down 200 basis points annually) not commensurately going up because of that.

Looking at the fourth quarter, Reinke said that intermodal is ticking up, with a positive trajectory, on the heels of what she called a service-driven slump, followed by an uptick.

“I think that will continue,” she said. “The intermodal service environment seems to be improved by and large and there is no longer the chassis availability issue we saw in 2020.”

Addressing inventories and its impact on broker activity, Reinke said an inventory buildup is going to ultimately benefit all of the freight volumes continuing to tick upwards.

“I agree with everyone who has said this, and I don’t see anything going [too high] until next year, though,” she said.

When asked to describe 2023 market activity on a year-to-date basis, Reinke was frank, saying it was not as bad as it could have been and was still ahead of 2019 levels.

“By and large, our members have been OK, particularly the ones who got into this business a decade ago or so,” she said. “They have been through this and ridden this out. I would say the ones that you need to worry about are those who got into the business over the last two years, because that’s been enormously challenging as they got into the business when the market could not have been hotter. And now you are seeing this and it probably feels like the Great Depression to them.”