The road freight capacity crunch continues in Europe

The European road freight capacity index decreased for the fifth month in a row, falling by -7.0% year-on-year in May 2024, according to the latest data by Transporeon.

The Capacity Index in April 2024 was 99.57. A reading under 100 indicates a capacity constrained environment. The Capacity Index has been over 100 since November 2022, suggesting that capacity availability has not been an issue over the past year. However, the rate of capacity increases has been falling gradually since March 2023, suggesting a reduced capacity surplus and that the capacity situation in the European road freight is normalising.

Compared to the previous month (April 2024), capacity in May 2024 has decreased by 4.9%. This indicates that the European road freight capacity is being constrained due to heightened demand, as evidenced by the reading of 94.67. The most recent GDP numbers for the eurozone show growth slightly above forecasts, with all major economies performing slightly better than forecast in the IMF’s April 2024 Regional Economic Outlook. The rebound is being driven by improved consumer and business sentiment. Household incomes are underpinned by stable labour markets, which have contributed to a recovery in earnings.

Furthermore, the two upcoming sporting events such as the Paris Olympics and Euros 2024 are causing volume increases in France and Germany, Europe’s two major economies, resulting in a downward shift in the road freight capacity. The spot rate index (134.47 vs. 125.42), which is higher than the contract rate index, supports the volume rises.

In May 2024, the Spot Price Index increased by 6.8% from April 2024 to 134.47, representing an 12.5% year-over-year increase. Similarly, the Contract Price Index also increased by 3.1% from the prior year and by 0.3% from the previous month to 125.42 in May 2024.

Moving forward, the lack of capacity coupled with an increase in consumer demand may further drive up spot and contract prices as seen in June 2022.

Author: Shruti Sasidharan

Source: Ti Insights

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