The U.S. trucking industry, valued at more than $875 billion, is in the midst of a “freight recession”, which basically means there are fewer trucks delivering goods across America. The number of authorized interstate trucking fleets declined by nearly 9,000 in the first quarter of 2023.
Recent indicators show a steep decline in freight volume. The American Trucking Association’s for-hire contract truck tonnage index dropped to 95.8 in March from 101.3 the month prior, hitting the lowest level since August 2021.
Truck carriers are sounding the alarm, as they are not meeting projected target revenues and across-the-board drops in volumes is pushing revenue per truckload down considerably. Many carriers had previously forecasted a rebound in industrial activity by the second half of 2023 but, as of late, most agree a recovery looks less certain due to the broader economic slowdown.
Initial indications show small and medium size carriers have been impacted the most as closures have become commonplace, while some major carriers are in the midst of employee lay-offs as operating revenues continue to plummet.
This recession has dragged diesel prices down by half since last year, signalling a broader slowdown in the economy. The key industrial fuel, which is used to power machines as well as trucks, began to dip during a warmer-than-expected winter, and the slowdown has been exacerbated by diminishing factory output and weaker demand for on-hire trucks.
One of the key factors contributing to the freight recession is a demand slump, resulting from retailers over-buying during the COVID-19 pandemic, unsustainable in any environment, let alone amid a backdrop of elevated inflation and a weakening consumer economy.
This situation is also overburdening warehouses across the country as the destocking process for retail inventories has been much longer and more painful than anticipated.
Consumers are still spending on experiences like travel, leisure, and restaurants, but they are leaning towards non-discretionary goods, leading to less items being produced and, thus, transported.
Some industry experts predict as small and medium-size business capacity leaves, we may see rates stabilize and eventually rebound as capacity starts to match demand.
For more information, contact William Sanchez, Manager – Truck Services.