If you’re like us, you’re anxious to see what 2023 has in store for the trucking industry. After all, the past few years have been turbulent, to say the least. Transportation professionals are no strangers to the rise and fall of economic conditions over the years. Typically, when forecasting economics, one looks for a multitude of global and domestic indicators on interest rates, creditworthiness, etcetera. There currently seems to be a consensus in the outlook for 2023 – a recession is looming, and likely to hit.
“Just how bad will it be?” – is the question. Luckily economists believe that it will be relatively mild. Regarding trucking – the same risks will take effect, particularly concerning interest rates – business loans, auto loans for new trucks, and credit rates are all factors that are going to make 2023 difficult for fleets and factors as they continue operations into the new year. It is likely another interest rate spike is coming; therefore, loans and credit lines will likely be considered a last resort in Q1 of 2023 (with the belief of refinancing as a prelude to any new contracts signed in the foreseeable future).
In a more general sense, economic forecasts are predicting an uncertain future – the collective opinion is that the effects of COVID-19 are still felt around the world, even as we enter what is (hopefully) the end stages. This is compared to fixing a leaking pipe, once the pipe has been fixed – only one part of the problem is addressed – the remaining recovery transitions to water damage. Much like a leaking pipe, the recovery efforts are still in transition to help stabilize economic conditions – as quickly as Q2/Q3 of 2023 or may take as long as 2024.
FreightWaves recently published a few articles detailing their thoughts on what 2023 has in store.
“Spot rates have already hit their lowest point, said 16.96% of respondents, or about one in six. Its possible rates have started climbing again for their businesses, but FreightWaves’ National Truckload Index (NTI.USA) — a seven-day moving average of spot rates — has continued to drop…“
“There is consensus that [spot] rates will turn around once we move past the first half of 2023. See the trend shown from the three most common answers for where respondents thought rates would be at the beginning of each of the following quarters… “
“Many carriers have been battered by high fuel prices and equipment costs in 2022. They’ve also had to contend with inflationary pressures driving down consumer and industrial demand. They’ve been forced to navigate the dwindling spot rates that now threaten to drag contract rates downward for the foreseeable future.”(FreightWaves, 2022)
An intriguing theory was raised by FleetOwner, which stated that the U.S. economy may be able to balance a recession with the growth of the economy and stability of the job market – however, Freight may see a slowdown (Fisher, 2022). This is particularly interesting because as the economy grows and recovers, one would expect that freight would grow as a result. If true, 2023 will create a unique environment where capacity can grow and shrink within very short timespans. Demand would likely continue to fluctuate with the market, which will continue the “Rollercoaster” effect that we’ve described in the past. A good example of what this could look like is what we previously saw at the beginning of the pandemic in 2020.
Overall, 2023 could be a positive period for businesses if they take steps to prepare for the risks and opportunities ahead of the looming recession. Companies should focus on a few key initiatives to weather the storm, such as:
- Adopt ways to reduce expenses and avoid inflated borrowing costs if possible
- Emphasize scalability to allow rapid adjustment to market fluctuations
- Embrace new technology that improves operational efficiency
- Connect to a network of trusted partners and vendors
By taking the above steps, businesses will be well-positioned for success in a changing economic landscape – no matter what lies ahead. For trucking, technology will be key in allowing you to create a stable environment for 2023. Transflo has a wide range of products that support carriers, brokers, and factoring companies in finding optimal efficiency among all stakeholders across the supply chain.
For more information on industry-leading software solutions for carriers, brokers, factors, and shippers, please reach out to us today.