Are we running into a freight recession?
There is substantial debate today regarding whether the trucking sector is heading into a freight recession. Or, could it be a that the decline in dry van and refrigerated spot prices is a function of more attractive contract prices coupled with freight patterns returning to their pre-COVID mix. That’s especially as year-over-year growth in inflation-adjusted retail trade sales slow and manufacturing picks back up. In this article, we look at the available data from government sources and the Logistics Managers Index (LMI) to try and shed some light on this issue.
To paraphrase Mark Twain: rumors of the death of the freight market have been greatly overstated. The data suggest that there has not been a substantial decline in trucking freight volumes in April and May. Rather, the market is returning towards a new equilibrium after having been profoundly discombobulated since the onset of the pandemic.
Our first piece of evidence comes from the Federal Reserve Board’s industrial production index for manufacturing excluding hi-tech products. We exclude hi-tech products because they contribute minimally to freight movements yet their upward movement tends to positively shift industrial production data. These data measure real output, meaning quantity of products produced in the USA (e.g., they are not affected by inflation).
The seasonally adjusted reading for April 2022 was the second highest reading since the end of the Great Recession, trailing only July 2014.
