The European road freight index for the second quarter shows that spot rates have dropped below contract rates for the first time in six years.
The Contract Rate Index is down 0.2 points quarter on quarter, although it remains up 2.8 points year on year, according to the European Road Freight Rate Benchmark report. Meanwhile, the Spot Rate Index is down 3.5 points quarter on quarter and down 7.5 points year on year.
These Q2 2023 rates results suggest short-term road freight demand is down with high consumer prices and lagging wages pushing down demand for the distribution of goods throughout Europe, resulting in further falls in freight rates on the spot market.
The contract market has seen much smaller rate falls due to the elevated costs base versus 2022, which has allowed the Spot Index to drop below the Contract Index.
Vincent Erard, Senior Director for Strategy and Development for global road transport group, IRU said the outlook for European road freight in the coming months is for further reduction in demand-side pressure, freeing up capacity and allowing for the possibility of further rate falls in the spot market.
“Falling order levels, compounded by 22-year high European Central Bank interest rates, indicate that demand pressure on the contract market will continue to ease, allowing for falls in the second half of 2023, albeit to a higher floor due to a larger carrier cost base,” he said.