Many trucking industry professionals have concerns about the skidding US trucking sector. Trucking demand is at its lowest point since June 2020, and the spot market is in even worse shape. Is the trucking downturn a sign of a recession to come? Or is it simply a symptom of larger economic problems like rising fuel prices and inflation?
The trucking industry is experiencing a broad downturn in demand for freight. Bank of America recently described trucking demand as at “near recession levels.” Not good! Demand for hauling is lower than it was last year, which is even worse than it sounds because of how high fuel costs are right now.
The spot market is experiencing these economic forces more sharply. The per-mile spot rates for reefers have decreased every month of 2022 (though, interestingly, spot rates for flatbeds are up!). This rate is especially concerning as it exposes how difficult earning a living will be for small truckers. Small businesses and owner-operators often rely on spot loads to shore up their numbers.
The trucking industry is beholden to the same economic forces as everyone else. Demand for shipped goods is down across the country, thanks in part to rampant inflation. Inflation has reduced people’s spending power, forcing them to save their money. Economists were already expecting demand for goods to reduce as the country lifted COVID restrictions and people shifted their spending to services and experiences. However, few foresaw this dramatic of a shift.
Furthermore, the Russia-Ukraine crisis has exacerbated these issues. Because of the war, fuel prices soared to an all-time high, putting an even greater burden on the shipping industry. Lower demand coupled with rising operational costs is pushing the trucking industry towards a recession.
Some economists have concerns that the trucking industry is the canary in the coal mine for a broad economic recession. Indeed, trucking industry recessions have preceded national recessions in the past, though they are hardly predictive.
However, most agree that this downturn will certainly affect smaller trucking companies and independent truckers. These organizations and individuals already operate with thin profit margins. It’s very likely that many of these businesses will downsize or even fold entirely.
No matter how you slice it, a trucking industry recession is not good for America’s economy. Let’s hope we avoid the worst of it.