The Upply x Ti x IRU European road freight rates index for Europe shows that both spot and contract rates are falling q-o-q, dropping by 7.5 and 2.8 points, respectively.
Spot rates in the European road freight market have experienced their second consecutive quarter of decline, marking a significant shift since the onset of the Covid-19 pandemic. The spot rates index fell by -7.5 points quarter-on-quarter (q-o-q) to 132.5 points. This is the first time rates have fallen for two consecutive quarters since Q2 of 2020.
Additionally, the spot market index has fallen below its Q2 2022 level, a time when costs rise following the war in Ukraine first became clear. Despite this, spot rates remain up by 8.9 points year-on-year (y-o-y).
The contract rates index has also fallen by 2.8 points q-o-q, the first fall in six quarters, but it is still up 10.7 points y-o-y. With volumes slackening and available capacity improving, the downward trend in rates looks set to continue in 2023.
The Q1 2023 European Road Freight Spot Rate Benchmark Index stood at 132.5, 7.5 points lower than in Q4 2022 but 8.9 points higher than in Q1 2022
Q1 2023 is the second consecutive quarter we have seen a fall in the spot rate index
The Q1 2023 European Road Freight Contract Rate Benchmark Index stood at 127.2, 2.8 points lower than in Q4 2022 but still 10.7 points higher than in Q1 2022
Fuel prices were 9% lower in Q1 2023 than in Q4 2022
Driver shortage projected to see 9% of positions unfilled in 2023, slightly lower than the 10% in 2022
Freight rates are expected to continue to soften in Q2 2023 but will remain elevated in comparison to historic norms as supply side pressure keeps costs high. Towards the end of the year, volumes are expected to start recovering, applying upward pressure on rates
Spot rates have declined 1.5 times faster than contract rates on average in Q1 2023. This comes as a result of falling demand from European economies, reducing the immediate demand-side pressure on spot market rates. Despite some easing of inflation and q-o-q growth in seasonally adjusted monthly consumption figures in Spain (+1.0%), France (+0.4%), and the UK (+0.5%), year-on-year figures reflect the ongoing impact of persistent inflation over the past 12 months.
Average seasonally adjusted monthly consumption is down year-on-year by 6% in Germany, 3.9% in France, 2.8% in Italy, and 4.3% in the UK. As wage growth lags behind inflation, the cost-of-living crisis worsens, reducing the appetite and ability to consume goods. This will further reduce demand-side pressure on road freight rates, allowing for further rate falls in both markets.