Industry Update: Truck Transportation Spring 2023
Despite the lagging effects of year-long Fed tightening and increasingly constrained lending conditions, the overall macro environment, while slowing, continues to outperform most expectations. The labor market and, by extension, consumer spending, albeit with a well-documented shift towards services, have been particularly resolute. That said, trucking conditions have been slow to emerge from a winter slumber, with multi-year low freight rates reflecting the age-old equation of volume (not enough) and capacity (too much), with both still firmly in favor of shippers. Persistently low Diesel prices continue to be a silver lining for many spot carriers that purchase fuel at retail, but which has also kept alive marginally viable capacity while slowing the natural re-balancing of the market. As summer approaches, favorable freight seasonality will be welcomed. However, sustainable industry tailwinds will have to wait for further re-balancing and a more relaxed Fed stance on inflation, including a rate reversal, which BMO economists don’t see until early next year.