As the US economy continued its slow opening, and the strain of produce season increased output freight volumes and we saw an increase of freight rates on the spot market, capacity was strained leading up to the July 4th holidays.
While we see COVID-19 cases rising in a number of states, this week we expect a short term volume capacity crunch. We will also wait to understand the true impact of the COVID 19 and post holiday freight volumes. Though economic predictions for 2020 are negative, it is predicted the U.S. economy will see a slightly deeper contraction this year but a bigger rebound in 2021 than previously forecast, according to updated estimates from the Congressional Budget Office.
Also, it is significant to note, U.S. manufacturing rebounded in June as major parts of the country opened back up, ending three months of contraction in the sector caused by the COVID-19 pandemic. The Institute for Supply Management, an association of purchasing managers, said July 1 that its manufacturing index rose to 52.6 last month after registering 43.1 in May and 41.5 in April. Any reading below 50 signals that U.S. manufacturers are contracting. As manufacturing continues to return this does indicate an upward trend specially for Flat Beds as manufacturers and Building materials suppliers demand Flat Bed equipment, significantly impacting this sectors volume capacity.
New orders, production, hiring, and new export orders all jumped in June, after they all declined in May but at a slower pace than in April. As we led to the holidays we saw the Freight Spot rate significantly increased. We also expect capacity will continue to be tight this week as more people start slowly coming back out of the holidays.
Freight volumes continue to rise weekly, esspecially in regions such as GA and borders towns such as El Paso, TX, New Mexico, New Orleans and Gulf Coast all showing significant increases. Areas such as Allentown, PA, and North East generally also started to pick up freight volumes again. A lot of this freight is expected to push over to this week, so we do expect a continuation of upward demand for this week where capacity will continue to be strained.
Atlanta, GA, Harrisburg, PA, Los Angeles, CA, and Ontario, CA all showed significant increases.
Spot rates are now showing increases well above March 2020 and even going as far back as Christmas according to DAT. We wait to see how the freight market will react to the challenges we are facing in the coming months. Business to business activity and business investment for new orders, production, inventory and of course employment all are still showing there is contraction, this continues to put us on market watch alert to see how the industry is going to go specifically with the second wave of COVID-19 that is happening right now.
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Have a great week, stay safe.