The U.S. trucking industry is slowing down and it’s not a good sign for the economy, experts say. In fact, trucking demand is at its lowest point since June 2020 when the U.S. was in lockdown, and the spot market is faring even worse.
Since the beginning of March 2022, there has been an unexpectedly sharp drop in demand for trucking everything from food to furniture, and rates in on-demand trucking jobs — known as the spot market–have fallen off.
Spot market rates in trucking represent how much it costs to ship cargo if you were to get contracted on the spot, according to Brooklyn-based shipping service EZ Freight Factoring.
“It basically just dropped off a cliff,” said Craig Fuller, who monitors millions of transactions between U.S. truckers and their customers as CEO of transportation data company FreightWaves, Reuters reported.
Some experts say the trucking downturn is a sign of a recession to come.
Bank of America has described trucking demand as at “near recession levels,” commercial insurance agency Safeline Insurance reported on its blog.
Throughout history, trucking proved to be a possible indicator for the U.S. economy. When people buy less, companies ship less and overall business slows. When business slows down, recession tends to follow. Economic recessions paralleled six of the 12 trucking recessions since 1972, according to an analysis by trucking data company Convoy.
“It is the proverbial ‘canary in the mineshaft’,” Joseph Rajkovacz, director of governmental affairs for the Western States Trucking Association, told Reuters. The association represents small trucking companies that dominate the spot market.
There are several reasons for the slowdown. Inflation has reduced people’s spending power and economist predicted that demand for goods would subside as the country lifted covid restrictions and people shifted spending to services and experiences, Safeline Insurance reported. Add to this the high price for diesel, which has also affected trucking. Shippers are waiting to fill truck trailers rather than rushing them out partially loaded. This move also further moderates demand, analysts said.
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Despite the U.S. economy experiencing a boom, economists and bond investors have been predicting and warning of a recession for reasons other than the declining trucking sector.
Recession forecasters point to inflation as a major concern and indicator of a looming recession.
Demand for everything from cars and homes to restaurant meals and workers has outstripped supply, causing the fastest inflation the U.S. has experienced in 40 years. Economists are skeptical that policymakers at the Federal Reserve can bring down inflation without driving up unemployment and sparking a recession.
Photo: Trucks line up to enter a Port of Oakland shipping terminal, Nov. 10, 2021, in Oakland, Calif. (AP Photo/Noah Berger)