Even with the price of truck diesel dipping below $5 per gallon, wide-reaching economic factors point to a relatively rugged freight transportation road ahead. But the critical factor to consider is “relative,” i.e, relative to what? Industry data indicates a downturn when compared to 2021 when the supply chains and trucking industry were overwhelmed. Unless the country plunges into a dark recession, truckers should remain in high demand.
The Federal Reserve continues to raise interest rates — a move typically linked to economic retraction — and freight rates are softening. Although the country faces a bleak economic forecast through the fall and into 2023, there’s no reason for stakeholders in the trucking industry to panic. Weaker year-over-year demand and inflation won’t change the fact the U.S. has been struggling with a persistent truck driver shortage, currently pegged above 80,000.
“We’re hardly at the ‘edge of the cliff’ stage when it comes to our outlook, but as the old investing maxim goes: Don’t fight the Fed,” ACT Research President and Senior Analyst Kenny Vieth reportedly said. “We believe wage inflation needs to moderate before the Fed can begin turning away from tighter monetary policy. As long as the jobs report remains strong, wage inflation may prove stubbornly persistent, which could, in turn, lead to a more-aggressive-for-longer rate hikes.”
Although markers such as “hikes,” “aggressive,” and “wage inflation,” tend to startle wheels-on-the-pavement truckers, it’s important to keep in mind CDL professionals remain in demand. Inflation continues to drive up the cost of goods and materials, but national employment numbers remain sound. Even if “wage inflation” cools, truckers have largely cashed in as fleet operations, freight carriers, and logistics organizations have increased salaries.
As reports surface regarding predictions of “moderate weakness” well into 2023, keep in mind those figures are based on month-over-month and year-over-year comparisons. Even during the economic downturn during the pandemic, truckers remained in demand. The spike in Asian imports overwhelmed the supply chains in 2021, primarily because America doesn’t have enough men and women hauling freight.
“While the economy and freight markets look more resilient than many observers fear, risks are weighted to the downside. Market weakness will not be uniform, but the type of freight is hardly the only differentiator. Carriers heavily engaged in the contract arena should continue to fare significantly better than the total market, and those that have managed to contain costs during this inflationary environment certainly will be in a better position to prosper,” FTR Transportation Intelligence vice president Avery Vise reportedly said.
Basically, truck transportation outfits will continue to acclimate to the changing supply-demand landscapes, regardless of pass-along diesel prices, interest rates, and other factors. As long as the country does not slip into a troubling recession that results in escalating unemployment or factors that tamp down consumers’ ability to purchase products and materials, truckers will be tasked with hauling those loads. In many ways, the trucking industry has become as essential as air and water.
Sources: trucknews.com, freightwaves.com, trucknews.com, freightwaves.com
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