While thousands of trucking companies have shut down, the domestic transportation industry has seen rising spending during a trucking bloodbath. Approximately 35,000 new carrier companies shut down in 12 months, ending September 2023. The number of trucking companies that went bankrupt in the same period years before was an average of nearly 15,000. Both large and small fleets with less than ten truck drivers have felt the strain of the bloodbath. Usually, a downturn tends to affect smaller carriers. However, megacarriers have also seen a decline in revenue. What is even stranger is that customer spending to ship domestically is still growing despite the current situation.
What is Causing the Bloodbath
The trucking industry tends to be cyclical, meaning it can be in a boom or a recession period. From 2017 to 2018, domestic transport rose, but in 2019, thousands of companies shut down. Another upswing took place in the summer of 2021, which resulted in a record number of truckers entering the industry. The reason was the coronavirus pandemic, which increased the demand for shipping to unprecedented levels. Fast forward to the current recession cycle that began in 2022, and the bloodbath has been harsher than usual. There are a few reasons why the decline is more significant than usual, including soaring costs.
Over the last year, the U.S. economy has seen record inflation, which the trucking industry felt. Costs, such as equipment and fuel, have been skyrocketing to a point where new fleets are feeling the impact. As the price of buying new trucks goes up, transportation companies cannot make the purchase, which results in some going out of business. Another cause of the current bloodbath is the number of trucking companies entering the market in 2021. As the industry had a surge in new carriers, the demand to ship domestically began decreasing from the coronavirus pandemic. The result of too many drivers and insufficient freight was a tumbling of spot rates, hurting fleets.
Why Is There Still Customer Spending During A Trucking Bloodbath?
A unique contrast from previous trucking downturns is that customer spending is currently high. In the third quarter of 2023, the GDP (Gross Domestic Product) grew 4.9%, the highest rise since 2021. The buying of durable products was one of the leading causes of the increase. This is distinctive considering the current inflation that the U.S. economy is feeling. While the spending may help stabilize the trucking industry in the short term, the long-term impact is still uncertain. The number of carriers entering the industry over the last few years is still high relative to the demand. It may be well into 2024 before the domestic shipping industry stabilizes.
A benefit of the current situation in the trucking industry is that there is a significant capacity to move freight. Shippers can benefit from finding decent rates for cargo movement since many truckers are competing for the shipment. Contact A1 Freight Solutions at 786-375-9420 or info@a1fsinc.com for a quote to move your shipment domestically. We are in contact with a web of carriers ready to transport your goods. Along with full-truckload and less-than-truckload shipping, we provide various other solutions for your transportation goals.