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U.S. freight demand plummets, trucker demand falls to 22-month low

U.S. freight demand plummets, trucker demand falls to 22-month low

aaron U.S. freight demand plummets, trucker demand falls to 22-month low 2022-06-25 11:44:50

U.S. freight demand plummets, trucker demand falls to 22-month low

Bank of America said freight demand was "close to freight recession levels." Shippers' outlook on freight rates, capacity and inventory levels is consistent with attitudes not seen since May and June 2020, when the coronavirus lockdowns led to a historic drop in freight volumes.

Bank of America surveyed the views of 44 shippers representing industries including retail, consumer goods and manufacturing, Ken Hoexter, managing director of freight research at Bank of America, wrote in a note to investors Friday.

Shippers' perceptions of demand fell 23% year over year. The proprietary truckload demand indicator fell to 58, the lowest level since June 2020.

Shippers' perceptions of freight rates have "slipped" to their lowest levels since May 2020, Hoexter said.

At the same time, these shippers are finding it easy to find capable carriers; the capacity outlook is at its highest level since June 2020.

They also noted that their view of inventory levels has climbed to the highest level since May 2020.

Some anecdotal examples from the Bank of America survey illustrate this data:

One food delivery company said it was getting more unwelcome calls from freight forwarders who had to find capacity on their own. Flatbed capacity is loosening slightly, but still tight. A representative of a forest products company said freight rates were starting to soften as truck capacity increased.

All indicators point to a freight recession

FreightWaves had previously reported that the U.S. freight market was on the verge of a “sharp, painful downturn.”

Friday's report to investors is the latest sign of a trucking "carnage" that many in the industry are seeing.

"At current rates, you have to work extra hard to break even," San Antonio-based team owner Dan Guzman told FreightWaves recently.

One of the key metrics is the FreightWaves SONAR Outbound Tender Reject Index.

This time last year, truck drivers rejected 25.76 percent of the previously contracted shipments. This shows that they are able to find better volumes through the spot market, which can ship on demand.

However, now that spot market prices have fallen, more and more drivers are starting to deliver contract cargo. As of Sunday (24th), the rejection rate had dropped to 9.92%.

Earlier this month, the Cass Transportation Index reported that the freight market was slowing, although Cass analysts said it was too early to declare a recession. a key leading indicator
Freight is often seen as a bellwether for other sectors of the economy.

If industries from retail to housing to lumber all expect their demand for truck drivers to decline, many economists see it as a harbinger of a recession. Because trucks carry 72 percent of all goods, if people don't buy or build as much stuff, there will be less demand for truck drivers.

A 2019 study by freight brokerage Convoy found that 6 out of 12 freight recessions resulted in a macroeconomic downturn. For example, in April 2006, the trucking industry slumped, and more than a year later, the Great Recession battered the overall market.

The trucking industry has experienced twice as many downturns as other industries. But for America's 2 million truck drivers, the impact could be brutal.

"Like any recession, the cyclical downturn in the trucking industry creates real upheaval for those working in trucking: businesses go bankrupt, people lose their livelihoods, and families break up," the report said.