Earlier Predictions for Freight Recession were Premature, but Not this Time, Researchers Say

In early 2022, many trucking sector analysts were predicting an imminent “freight recession." For example, in April, an analyst from JP Morgan said in a research note that a freight recession soon was “inevitable,” as he downgraded his ratings on the stock prices of a number of carriers. (See Supply Chain Inflation, Trucking Stocks, and the US Economy.)

Surpply Chain Digest Says...   While most US truckload freight moves under contract rates, spot rates can be a big driver of strategy for shippers. What do you say? Click here to send us your comments Click here to see reader feedback

But such predictions were perhaps a bit premature. The American Trucking Associations’ Freight Tonnage Index was up a solid 2.8% in August versus July, and 7.4% compared with August 2021. The index for September is not yet out.

Compared with August 2021, the SA index increased 7.4%, which was the twelfth straight year-over-year gain and the largest increase since June 2018. Year-to-date through August, compared with the same period in 2021, tonnage was up 3.9%.

Year-to-date through August, compared with the same period in 2021, tonnage was up a solid 3.9%.

But with more worrisome economic signs now than earlier in the year, such as soaring interest rates and an expected slowdown in upcoming Q3 corporate earnings reports, that freight recession may at last really be here soon.

“Our checks indicate freight activity was seasonally weak through late-September, with limited indication of holiday demand to-date,” wrote KeyBanc transportation sector analysts Todd Fowler and Carney Blake in a research note last week, adding that “With imports decelerating, inventories normalizing and spot (rates) below contract rates, we now see volume and pricing weakness into 2023,” as first reported by MarketWatch.

Fowler and Blake actually predict a “trucking winter,” will arrive soon, maybe in advance of the actual winter in the US. That led them to downgrade the stocks of trucking companies J.B. Hunt Transport and Schneider National.

Spot shipping rates for bpth ocean carriers and trucks have been dropping sharply throughout 2022.

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While most US truckload freight moves under contract rates, spot rates can be a big driver of strategy for shippers.

Spot rates are currently 25-30% below contract rates, Fowler and Blake note, which could in part lead to “mid-single digit contract declines in 2023,” in good news for shippers - but maybe at the price of a deteriorating economy.

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