5 Industry Trends That Could Contribute to a Future Freight Recession

The global economy has reached a significant turning point. Worldwide, we’re grappling with inflation, supply chain issues, economic uncertainty, and more.

How does this affect the transportation industry? Can we predict what the future will hold?

Today, we wanted to break down these complex issues by looking at 5 industry trends that could contribute to a future freight recession.

1. Rising Inflation

Inflation has risen to 8.5% in the US and 7.6% in Canada, presenting complicated challenges for individuals and businesses in every industry – transportation included. But how did this happen?

When the pandemic struck, the government pumped money into the economy and cut interest rates, resulting in:

  • Unprecedented sales volumes
  • Factories & stores unable to meet the demand
  • A significant increase in product prices

In the trucking world, this series of events has ultimately led to highly inflated and ridiculous price hikes on virtually all equipment. As a result, the cost of trailers, trucks, and other critical parts has more than doubled, leaving businesses scrambling to find solutions to lower fleet operating costs.

Left unchecked, the rapid inflation in the trucking industry could be a key contributing factor that pushes us into a freight recession, potentially destabilizing the entire economy.

2. Equipment Production Delays

It’s no secret that trucks, trailers, and other transportation equipment are not only costly but also challenging to acquire. In fact, we’re still dealing with the consequences of COVID lockdowns, which caused a major drop in microchip production and other critical components.

While production has picked back up, the shortage of essential elements and a surge in orders have left trucking manufacturers still unable to meet demand.

What does this mean for the transportation industry?

Many freight companies are still waiting for trucking manufacturers to process backlogged orders, leaving them unable to access the new equipment they have already paid for. Unfortunately, this could have a devastating impact on the operation efficiency and lifespan of smaller transportation companies that weren’t adequately prepared.

3. Global Uncertainty

It’s estimated that nearly half of the containers that come into the United States originate in China – making their way onto trucks and trailers across North America. However, China’s ongoing COVID lockdowns could have a detrimental effect on the global supply chain. 

So how could this contribute to a freight recession?

  • Ongoing COVID lockdowns essentially shut down major manufacturing cities.
  • Raw materials can’t get from ports into factories, and in turn, the finished goods can’t get back to the ports.
  • Without manufacturing at home, there could be a period of even further inflation due to choked supply. 

Although the effects of this could reverberate throughout the entire global economy, the transportation industry will be faced with the challenges brought on by the unpredictable fluctuations of container volumes entering North America.

4. Soaring Interest Rates

In response to steep price hikes, the government stepped in to raise interest rates and help curb inflation. However, this dramatic increase has significantly impacted those in the trucking industry. 

For example, in just over a year, we’ve seen financing rates rise from:

  • 5-6% to 9% – for those with good credit
  • 11-12% to 14-15% – for those with mediocre credit

Needless to say, these interest rate hikes have many companies and individuals thinking twice before purchasing a new truck – whether to replace aging equipment or expand their fleet.

The truth is, with the state of truck financing this bleak, it essentially throws a wrench into the growth of many small transportation companies – with the potential for countless businesses being forced to shut down. 

5. Decreased Freight Rates

The period from 2020 to 2021 was truly a goldmine for trucking. Unprecedented demand for shipping and a slew of other contributing factors meant the transportation industry was thriving. 

However, now that this pandemic boom has officially passed, many companies are struggling to reach the same shipment volumes. In addition, rising fuel costs, higher equipment prices, and declining freight rates have left everyone trying to stretch each dollar much further than is really possible.

The problem is that many transportation companies depend heavily on the open market. Without ongoing contracts and preparation for these periods, a record number of trucking businesses will be forced to scale down their operations or shut down completely. 

Put Your Trust in a Prepared Shipping Partner

While a freight recession would have widespread effects, the extent to which individual businesses are impacted will vary dramatically depending on their level of preparedness.

At ET Transport, we’ve worked hard to ensure we’re completely prepared for any economic downturns and industry uncertainty. We pay close attention to transportation trends, informing our decisions to lock in contracts and secure volume commitments for times like these. 

So what does this mean for our customers?

While the economy is in turmoil and many transportation companies are struggling to stay afloat – we can offer stability and security for all of our clientele. 

With an expansive fleet, key certifications, dependable drivers, and a stellar 98% on-time delivery rate, we can guarantee your shipments will be safe in our hands. 

Are you searching for a reliable shipping partner? Don’t hesitate to get in touch with our friendly customer service team today. 

Why Ship With ET Transport?