Current trucking industry trends have increased speculation of the end of freight recession nearing. For the past few years, domestic shipping has experienced a decrease in freight volumes, indicating overcapacity. Freight rates have been hit the hardest by the decline, decreasing for various shipping categories, including flatbed, van, and reefer. Spot rates have also reduced, some even decreasing close to 70% from 2022 to 2023. While the industry typically experiences upward and downward swings, this downward trajectory has been more significant than usual. After nearly 27 consecutive months of declining rates, many see the light at the end of the tunnel. How did the recession happen, and why is there a belief that the end is near?
How Did Domestic Shipping End Up In A Recession?
The trucking industry entered a recession due to various factors affecting the supply-demand balance. The most significant contributor was the coronavirus pandemic. At the start of COVID-19, the demand to move cargo reached unprecedented levels. Not only for international shipping but for moving cargo domestically as well. To meet the need to transport goods, a record number of truckers entered the industry in 2021. As the demand started to decline, the number of carriers remained constant. The result was overcapacity and an excess number of drivers with insufficient freight to move led to declining spot rates. Various other side effects from the pandemic contributed to the recession, like lockdowns.
When the lockdowns happened, delays and other restrictions strained cargo movement. Delays in manufacturing and shipping resulted in bottlenecks across numerous supply chains, further affecting the recession. Along with the pandemic, factors like rising fuel costs also impacted the trucking recession. With Diesel being carriers’ primary expense, higher costs add to the pressure. Inflation added to the strain on trucking companies in other ways, such as by increasing maintenance, labor, and insurance costs. The shift in the overall freight patterns post-pandemic also hurt the transport industry, with regular freight hubs losing market shares to emerging markets.
Why Is The End Of The Freight Recession Nearing?
Trucking executives across the U.S. believe the recession is ending due to a 0.2% year-on-year rise in July 2024. This is after over two years of freight rate declines. The Russell 3000 Trucking Index rose 9% this month after an 8% drop in the first half of this year. If the demand continues to build in the next few months, the fourth quarter may see a return to seasonal activities. While there is a positive outlook for the industry’s recovery, it does not come without challenges. For example, despite the returning demand, trucks are still overcapacity, with the need not rising fast enough.
Despite optimism growing for full recovery in the industry, it may take into 2025 until significant change happens. In the meantime, shippers still require domestic cargo movement, and we have freight brokers to assist you. Brokers have a network of carriers with numerous solutions for your supply chain. They also find the best rates to ship cargo, handle documentation, and coordinate transportation. During the journey, they provide constant updates on the freight’s location. Contact A1 Freight Solutions at 786-375-9420 or info@a1fsinc.com for a quote to move your shipment domestically today. We stay with you from the point of origin to the final destination.