After a pullback in freight transportation demand in the second half of 2022 that accelerated downward in the fourth quarter, there are some initial signs that freight markets may be approaching (or have hit) a bottom in terms of freight demand. However, despite some carriers expressing positive sentiment for volumes in the second half of 2023, we believe there are several signals indicating that additional freight demand will not reach the heights of 2021 – particularly for upstream industrial demand – leaving some excess capacity idle in the 2nd half of 2023.
Clearly, the consumer portion of the economy is hotter than the upstream B to B economy. It is much like 2018 and 2019 – except with inflation.
In February the Logistics Managers’ Index’s (LMI) Transportation Price metric read in at the fastest rate of contraction in the 6.5-year history of the index. This marks eight consecutive months of contraction in transportation price, coming after nearly two years of expansion. Consistent with this, the producer price index for long distance general freight trucking registered the steepest monthly decline going back to 1992 in January, with February’s prices down 11% year-over-year. While some carriers have expressed optimism that volumes will pick back up later in 2023’s second quarter, this has clearly not materialized through the first two months of 2023.
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