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The Great Freight Recession lasted longer than the COVID bull market.
One of the worst freight markets in history may be closer to the end than it looks on the surface. The post The Great Freight Recession Lasted Longer Than the COVID Bull Market appeared first on FreightWaves.
On March 31, 2022, FreightWaves announced a looming freight recession. More than two years later, the freight market is still in one of the deepest and longest recessions in history.
Our initial conclusion comes from the FreightWaves SONAR signal. The high frequency dataset that tracks freight supply and demand in real time indicated that the freight market was about to collapse. When FreightWaves first published this article, many people were not only skeptical of this conclusion, they laughed at FreightWaves' judgment. Even after the recession began, few expected it to be as severe or long-lasting as it is now.
As the Great Recession in freight transportation enters its third year, the trucking industry can't help but ask, "How much longer will the market decline?"
Bottomed out at last
We believe we are at the bottom of the market.
SONAR's Outbound Tender Rejection Index (OTRI), which measures the percentage of truckload transactions rejected by carriers, suggests that the situation is better now than it was a year ago, though not by much.
Scrap is a very reliable indicator of the balance between supply and demand. The higher the label rate, the more loads a carrier has to choose from. The lower the reject rate, the fewer loads a carrier has to choose from. While some people look at the absolute value of rejections, we also look at past rejections.
The current waste rate of 3.951 TP3T is higher than the 2024 low of 3.391 TP3T on March 26th, and up sharply from 2.881 TP3T a year ago.
While there is a real gap between peak and hourly volumes, the gap is narrowing. In the past year, carries have increased by 9%.
The index has been in negative territory since the fourth quarter of 2022. Capacity continues to exit the market, allowing the market to rebalance.
During the two years of the COVID bull market in the freight market, the fleet accumulated a large operating surplus and built up a strong balance sheet. This has enabled them to stay the course over the long term.
During much of the Great Recession, trucking fleets were operating at a loss for many miles. This forced them to utilize the financial reserves they had built up during the COVID bull market.
The Great Recession lasted longer than the COVID bull market, meaning that truckers spent much of their operating time in recession from the first days of the COVID lockout. For those truckers who remained in the market, their reserves may have been depleted, and with them their strength.
However, for those truckers who have managed to stay in business, the hard times may be coming to an end. The data suggests that a restoration of the supply/demand balance will come as soon as the swing season of 2024, but almost certainly in the spring of 2025.
The post The Great Freight Recession Lasted Longer Than the COVID Bull Market appeared first on FreightWaves.
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