Inflation in the United States is decreasing, however, US freight demand isn't recovering despite the faster-than-expected growth of the US economy, according to a new report by S&P Global.

 

Citing speakers during a recent Journal of Commerce webcast, the report noted that what's happening instead, is that the freight decline that started in the fall of 2022 will likely last through the end of the year.

 

And for the US trucking sector, this downturn could stretch further into the second quarter of 2024, it added.

 

Speakers also anticipate only moderate growth, even with the resurgence of demand, as long as there are no unexpected disruptions.

 

"We think the [truckload] spot market has hit bottom," the S&P Global report said, quoting Chris Caplice, chief scientist at DAT Freight & Analytics.

 

"We're set up to start a recovery, but I agree it's probably two-quarters away, maybe three," he said during the webcast.

 

The continued downturn was attributed to low manufacturing output, overstocked inventories, record employment in the trucking sector and persisting overcapacity in the market. 

 

Jason Miller, associate professor of logistics at Michigan State University, said in the webcast that a combination of a 2% decrease in ton-mile activity with a 3% to 4% increase in trucking employment, resulted in a very "soft market."

 

According to Miller, trucking companies that offer their services for hire have increased their workforce by 7% since the middle of 2018. This information is based on data from the US Bureau of Labor Statistics.

 

He also mentioned that the amount of freight being transported by trucks is currently at a similar level to its peak in 2018, which was the industry's strongest year before the COVID-19 pandemic.

 

Miller said an increase in demand is needed to change the equation.

 

"The auto sector is doing phenomenally well right now, but there are other manufacturing sectors like paper that are certainly hurting," the associate professor of logistics added.

 

Miller went on to note that the current freight market resembles the "soft patch" seen in 2012-13 or the slowdown of 2016-17.

 

"We're probably looking at another six to nine months before we start to get out of this," he added.

 

S&P Global said in its report, quoting Bobby Holland, director of freight analytics at US Bank, that nationwide truck shipment levels in the US have now decreased for five consecutive quarters.

 

He said that total volumes dropped 1.2% on a sequential basis and 9% year over year in the second quarter. Meanwhile, shipper spending on transportation dropped 8.3% from the first quarter and 10.9% from a year ago in the second quarter.

 

The Southwest region has proven more resilient to the downtrend seen.

 

"The Southwest is a powerhouse," Holland told the webcast, where he attributed it to cross-border trade with Mexico — and as oil production continues to be strong.

 

According to Holland, the West Coast is experiencing increased consolidation of freight which is affecting shipment volume. During the peak of the pandemic, the priority was to ship items quickly by getting them on a truck and moving them. However, there is now a shift towards more consolidation. 

 

"Some regions are still faring badly compared to pre-COVID data," Holland said. "Right now, we're trending slightly below pre-pandemic levels," he added, referring to shipments and spending.

 

Caplice said despite the continued downturn, however, "we all know the market will turn; it's not going to go on like this forever."