The trucking industry is going through a freight recession. With a decline in China trade, falling ocean freight, and high inventory levels, truckers are facing a tough market.
The Owner-Operator Independent Drivers Association (OOIDA) and the American Trucking Associations (ATA) both agree that this is a cause for concern. If things don't change by Memorial Day, the freight market is likely to stay at current levels for the rest of the year, according to OOIDA. The ATA's "For-Hire Contract Truck Tonnage Index" has dropped by 6% month-to-month, the lowest point since August 2021.
General merchandise stores like Walmart and Target are destocking. High inventory levels and overstocked warehouses are two big reasons for this freight recession. On top of that, there's the issue of elevated inflation and a weakening consumer spending. With ocean freight orders down 50% year over year, it's not looking good for truckers. But, as Jonathan Chappell, a senior managing director at Evercore, said, "Capacity will certainly leave the market, but trucking is cyclical." So while things may be tough now, it won't last forever.
In the meantime, consumers are spending on experiences and non-discretionary goods, which correlates to less spending on goods produced, ordered, and transported. Watch the video to learn more about the current state of the freight recession and what it means for truckers on the road.
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