For the first time since February 2022, the price-per-mile of both haulage and courier vehicles has fallen, according to the TEG Price Index, as we approach the peak season for logistics.
Courier prices are down 3.1 points (2.4%) and haulage prices are down 2.4 points (2.0%). This follows a trend we’ve seen for the last three years: prices fall slightly in October/November before climbing sharply with demand in December.
Overall road freight prices are down by 3.2 points (2.5%) when compared to last October. Haulage prices have seen the biggest annual drop, plummeting by 15.4 points (11.5%) – the biggest year-on-year drop since April 2020. Courier prices, on the other hand, have risen 5.9 points (4.8%) since then, despite falling a significant 3.1 points (2.4%) points this month.
Road freight businesses of every sort will welcome their traditional Christmas bonus as they contend with ongoing inflationary pressures and try to absorb rising costs. UK inflation currently sits at 10.1%, Eurozone inflation has hit a record 10.7% and OPEC+ recently agreed to cut oil production to raise fuel prices.
However, it may be a leaner Christmas than usual this year: retail sales volumes fell by 1.4% in September 2022, 1.3% below February 2020’s pre-coronavirus levels. With surging household bills and inflation driving food prices ever higher, there are signs that consumers are cutting back on spending.
Even if demand in December isn’t as high as previous years though, increasing fuel costs are expected to push prices up: at 189.69p per litre, diesel prices have reached August levels again. While we don’t seem to be seeing the impacts of this yet, road freight price drops may be short-lived, as companies will not be able to absorb such costs for a sustained period.
Lyall Cresswell, CEO at Transport Exchange Group and new market insights platform Integra, says: “It’s immensely promising to see prices dropping across both haulage and courier sectors. As previous years’ data shows us, this isn’t uncommon before the festive peak period.
“However, given the rising fuel prices and the volatility of haulage prices in particular over the last few months, these price drops might not last long. We could see them climb next month and then head into Christmas already on the way up.
“One thing that might bring them down is the prospect of a UK recession, which many analysts now think is unavoidable. It’s a very uncertain time for economies and it’ll be interesting to see how the sector responds to the shifting business landscape.”
Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, says: There are all sorts of other reasons for using couriers and panic vans, but one might expect the rates to be related, at least in some way, to internet sales. However weekly internet sales have fallen in value year-on-year for every month of 2022, while the TEG index for spot courier prices has risen year-on-year for every month of 2022. Even in October, when the courier index has made its seasonal dip, it’s still well above last year. The extent to which resource shortages and increasing input prices, such as diesel, have been driving inflation is clear.
“The good news for the economy, if not for hauliers, is that inflation in all elements of the TEG is now reducing – the haulage element of the TEG has been showing year-on-year deflation for five consecutive months now.”