What’s going on in the freight market?
It has been a turbulent few years for the economy and the logistics industry. Supply chain constraints seemed to be never-ending, inflation reached 40-year highs, existing home sales rocketed to new highs before plummeting to their lowest levels since the early 2000s, and the list goes on.
The conversation has now shifted to the possibility of if and when a recession could occur as we continue to deal with the unfortunate combination of high inflation and the Fed’s interest rate hikes in an attempt to bring down the aforementioned inflation. High inflation and rising interest rates will likely put a lot of pressure on the economy, especially on the consumption of goods. This is the portion of the economy that most impacts the logistics space.
We are already starting to feel the negative consequences within several areas of the economy. As mentioned above, existing home sales have fallen dramatically as 30-year mortgage rates have reached their highest level since 2002 while prices continue to rise. Manufacturing PMI (a measure of the manufacturing industry with a reading above 50 indicating growth) has been in contraction territory for three consecutive months, the first time since the initial onset of the pandemic in early 2020. Industrial production is still positive from a year-over-year perspective but continues to inch closer to negative territory.
While things may seem particularly negative at this point, there is also good news. Most experts are expecting a relatively short and mild recession. This means they expect the economic environment will likely be headed in a more positive direction by the end of 2023. Additionally, it appears that both the economy and the logistics industry are moving back toward historical norms in terms of seasonality and cycles. This will be welcome news for shippers and carriers as business hopefully becomes more predictable than it has been since the initial onset of the Covid-19 pandemic. Despite the recent slowdown, consumer demand has been impressively resilient over the past few years and is expected to see continued strength.
Despite some recent negative data, there is clear reason to be optimistic about the long-term health of consumer demand and, ultimately, the logistics industry. However, a lot is happening in the economy now, making it incredibly difficult to know precisely what will happen and when, especially when we try to predict the severity of the impacts of high inflation and the Fed’s continued interest rate hikes on consumer demand. Shippers need to be prepared for any situation that might arise in these unpredictable times.
ArcBest is well-positioned with solutions to fit any need, whatever the future holds. As a logistics company with owned assets, we can offer solutions through ABF Freight® and our Panther Premium Logistics® fleet in addition to MoLo’s network of more than 95,000 capacity providers. With a combination of advanced supply chain technology and an experienced customer solutions team, ArcBest is equipped to solve even the toughest logistics problems.