March, which is typically considered a robust month for trucking, was light in 2022. The freight truck transportation market was seen declining in March and was expected to hit a new low in the following months.
As for now, Bank of America has issued a warning to trucking service owners and called the trucking demand is “near freight recession levels”. The bank’s recent survey also found that freight demand had reduced to 58%, which indicates an early recession. In addition, the shipper’s rates, inventory levels, and truck loading capacity are seeing a new low since the pandemic lockdown in June 2020, which was a significant decline month for freight volumes.
Ken Hoexter, the managing director of the Bank of America’s trucking research, stated to FreightWaves that shippers’ view of demand is down 23% year-over-year.
Hoexter also noted to investors that, per a Bank of America study of 44 shippers, the view of rates has hit a low not seen since May 2020.
This statement is also backed by Joe Rajkovacz, the director of governmental affairs and communications for the Western States Trucking Association, who said, “When trucking demand falls, it means the economy’s slowing down.”
Analysts share that several factors contributed to the decrease in trucking demands. When the pandemic restrictions were imposed, consumers’ spending habits changed from shopping in stores to spending online. According to the Bureau of Economic Analysis, now that the restrictions are relaxed, people have gone back to spending offline, with more money spent on services than goods.
Another reason could be inflation rates and increases in oil prices, which according to Craig Fuller, the CEO of Freightwaves, could result in a “major consumer slowdown”.
According to Rajkovacz, there are two types of trucking markets: one run by long-term contracts and one that is market-dependent that relies on intermediaries and brokers. The latter type favored truckers during the pandemic, but now that is changing.
On the other hand, shippers have more capacity to load goods, and the inventory levels are the highest since June 2020. This means that freight brokers are struggling less to find capacity for shipments.
According to the Bureau of Transportation Statistics, transportation is considered the leading indicator of economic cycles. However, the spot markets have declined, and a serious melt-down of the trucking industry could be on the way. As a San Antonio-based fleet owner told Freightwaves, “The way the rates are, you have to run twice as hard to make ends meet.”