By Frank Gambino
The 732-billion-dollar question on everyone’s mind…where is the trucking industry really headed? After all, it’s no secret that most forecasts have looked something like a heart monitor at a haunted house with rising and falling that has experts scratching their heads at what could possibly come next. There are many factors that alter the industry, some of which our team does have insight into.
While there may be few definitive answers – many analysts seem to think that we’re quickly approaching some degree of trucking recession. There are many data points to back up this prediction – so let’s take a look:
- With the growing concerns of inflation, consumer spending is trending down. FreightWaves details how “Core retail sales fell by 1.2% in February,” further detailing that, “84% of Americans surveyed by Bloomberg News said they would cut back spending”. Additionally, with growing concerns over the political climates in Ukraine and Russia, the market has found instability in consumption. Source.
- A sizeable drop in dry-van spot rates. The Wall Street Journal explains, “Dry van truckload spot rates excluding fuel surcharges are down 37% since December and 27% in the past month, according to Bank of America Corp. analysts.” Source.
- Growing capacity signals that the market is not nearly as tight as seen earlier in the pandemic. The Wall Street Journal describes how “Bank of America’s measure of trucking capacity available to shippers jumped last week to its highest level since June 2020, while its measure of shippers’ outlook for freight rates dropped sharply to the lowest level since July 2020.” Source.
- Load rejections continue to tell us about the current state of the market. FreightWaves illustrated a year-over-year comparison, which shows, “Compared to last year, only 11% of loads are getting rejected right now. This is way down from the 25% at this time last year.” The significance of this decrease is due to fleets and owner-operators trying to get ahold of as many loads as possible during the slow-down. Source.
So where does that leave us today and what do you need to know…?
At the time of writing this, our forecast prediction is there is going to be a continuation of this slowdown due to multiple markets battling inflation, limited manufacturing, interest rate adjustments, and material shortages.
- Carriers: Brace for potentially limited freight volumes and align yourselves with regular shipments if possible. If nothing else, be prepared to take on loads that you may have previously been more selective about taking.
- Brokers: Load volumes will likely be on the decline, so be sure to engage your trusted carrier partners to give them as much business as possible during this slowdown. The need for lean-running strategic planning will be essential as we work through the bumps.
- Shippers: Sourcing materials may become more challenging. If possible, try to inventory what you can and plan for lean production runs in the interim.
The industry has been on a merry-go-round of sorts for the past two years, so our hope is the recent slump will flip once these items are addressed in a post-covid world. Complexities surrounding the Russia-Ukraine situation will also continue to have an impact on the supply chain (including fuel, allocation of materials, and trade restrictions).