The Freight Market In 2023: A Recession Or Just “Rebalancing?” [Updated for 2024]
While underwhelming demand for carriers is challenging fleets across the nation, a new report might give trucking companies a dose of hope.
Data from Motive, a fleet management technology company, suggests current market influences are rebalancing the trucking industry to pre-pandemic conditions. This means there may be a light at the end of the tunnel for carriers struggling to stay afloat!
The report shows a dropping number of carriers across the country. However, those exiting the industry appear to be centralized in states that experienced the biggest pandemic-induced spike in new trucking authorities.
This rapid rise and fall in trucking companies entering and leaving the market indicate a “rebalancing” of the market, as localized corrections account for much of the volatility we see in the news.
Knowing how current economic conditions are shaping trucking operations countrywide is integral to the strategy of any fleet manager looking to keep trucks on the road, busy hauling freight, and profitable. This article dives into the findings of the monthly carrier market analysis and how it reflects the wider health of the industry.
Here are the key points from the report:
A freight market correction
Southern states, where the industry grew the most in recent boom years, are now seeing the most carriers exit the industry. For instance, Texas saw a 35% jump in the number of carriers hitting the road in 2021.
Today, Texas is leading the nation’s contraction in number of interstate for-hire carriers with over 2,300 carriers dropping out of the market year over year. Florida lost approximately 1,400 carriers, and Georgia nearly 1,300. In comparison, New Jersey and Pennsylvania only saw about 400 carriers drop out of the market, while Ohio and Illinois saw a reduction of about 300 carriers.
“The bigger the pandemic pop, the steeper the commensurate correction,” the report said.
The total number of carriers in 2023 has declined across nearly every state, but the decline is not even across the country. The report states that: “The freight recession is continuing when compared to pandemic highs, but it’s likely more of a rebalancing given the fact that the 27% YoY industry growth seen in 2021 was almost quintuple the 10-year average of 5.6%.”
Soft market conditions
While the industry may be rebalancing, carriers nationwide are all too familiar with the difficult state of freight.
Macroeconomic trends are behind the current downmarket conditions that are forcing unstable trucking companies out of the market. As inflation pushes costs higher, consumer demand is lagging, and retailers are taking note. In a typical Q1 pattern, Motive reports that the country’s top 50 retailers (by revenue) saw more hesitancy to restock inventory. Weaker demand for loads is a trend expected to continue throughout Q2.
“This may mean that inventory purchasers have more modest expectations for the coming quarter, as consumer demand falls and supply chain health improves,” the report said.
Through all these market fluctuations, trucking companies of all sizes need financial resilience to stay in the game. Established fleets looking to capitalize on the rebalancing of the freight market must have the financial stability to maintain operations and seize growth opportunities as less successful carriers exit the industry.
Capitalizing on freight industry changes
Despite harsh conditions, new opportunities are arising. The data shows resilience in the number of new carriers entering the freight market even as carriers exit. The number of trucking companies entering the market aligns with the rolling six-month average.
“This indicates businesses are still seeing enough opportunity to enter the market. It’s critical to monitor Q2 to see if the recession is indeed a recession or a reversion to the mean,” stated the report.
One of the challenges in capitalizing on freight industry changes in the current economy is finding the working capital to expand fleets, upgrade equipment, or finance acquisitions as the freight market improves. Carriers with the financial agility to respond quickly to new business opportunities will have a competitive advantage when the market improves.
To that end, many prominent players in the trucking industry are now turning to alternative finance companies for fast access to working capital.
Current industry conditions may look rocky, but the long-term projections are more hopeful. The trucking industry is essential to the functioning of the economy, and it is unlikely that the current soft market conditions will cause a long-term decline in demand for trucking services. Alternative finance companies, experienced in transportation, understand the industry’s volatile nature and provide specialized financing options designed specifically for trucking.
Well-known services such as freight factoring can be combined with equipment refinancing, a customized asset-based loan option that leverages the equity value of your working equipment. With improved cash flow and resources to access large cash injections, trucking fleets can operate with resilience and agility to meet the evolving demands of a changing market.
While economic conditions continue to challenge the state of freight, evidence of a possible rebalancing is a silver lining for businesses able to weather the storm.
Investing in your fleet and personnel, plus securing contract business will position carriers to capitalize on opportunities as the market rebalances. After all, the industry may be experiencing low demand, but it’s not like we’ve never been here before. Trucking has a volatile history of extreme highs and low lows.
The long game is to be resilient and agile. Transitioning to alternative funding options to finance your operations helps to provide more access to more capital when its needed. With readily available capital to pay bills and keep trucks fueled, trucking companies have the resources to overcome the market’s current condition and be positioned to capitalize on future growth.
eCapital is an alternative lender specializing in the transportation industry for over 25 years. A deep understanding of the market has been shaped by navigating the same turbulent environment and economic volatility as our trucking clients. Our industry expertise and resources are available to trucking companies in all stages of development to help strengthen their financial structure and grow their business through boom years and adversity.
For more information on how we can help your trucking company survive and grow, visit eCapital.com.
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