The October 30th weekly proprietary Truckload Index showed demand and capacity “mostly in line with seasonal trends,” according to Morgan Stanley.
“That said, our index will start to show year-on-year improvement next week as carriers are now lapping the sharp downturn in economic activity last year,” said analyst Adam Longson.
Demand was steady and improving year on year during the week ended October 30th. “Our incremental demand index remains relatively steady despite passing the typical seasonal peak,” said the Morgan Stanley report. The year-to-year comparisons are showing some gains over the heavily depressed levels of the same period in 2008. “Our demand index represents incremental demand, not total demand, but recent positive trends have been consistent with gains in truckload demand as inventories have moderated.”
But incremental supply remains “stubbornly high,” according to the report. “Despite capacity leaving the industry and talk of carriers failures, our incremental supply index (a proxy for excess capacity, not total supply) continues to hold at elevated levels. Incremental demand is starting to follow seasonal trends, but our incremental supply index has continued to climb - defying the normal seasonal trend. We believe this not only reflects the poor state of the market (i.e. carriers can't afford to flex with seasonal trends), but also the magnitude of the supply overhang.”
