AUSTIN, TEXAS — American Trucking Associations Chief Economist Bob Costello expects a muted fall freight season to push more trucking carriers out of business in the coming months.
Smaller companies, particularly those that launched to capitalize on record post-pandemic rates, are struggling to survive in a tough economy that has become trucking’s top concern, he said at the 2023 Management Conference & Exhibition at the Austin Convention Center last week.
“I hate delivering this message ... because it's other people's pain for our gain,” Costello said. “It's not a fun message, but that's the reality of the market economy. And that's what needs to happen. And that is what is, in fact, happening.”
During his remarks, the ATA chief economist advised trucking executives the Federal Reserve is unlikely to reduce interest rates unless the U.S. falls into a deep recession next year. The ATA economist said he expects any recession in the next year to be mild.
Contract rates have stayed far steadier than the spot market, which doubled in size during the post-pandemic freight boom but has fallen by 78% since its peak, he pointed out.
“We are going to continue to see more supply leave this industry, and even though demand is not going to pick up much, I think a quarter, a couple of quarters from now, things are definitely going to start to feel a little bit better for you,” Costello said.
A small carrier that entered the spot market to pounce on once-soaring spot rates could have stowed away as much as $100,000 per vehicle over the past few years, Costello said.
But even those able to save that much have, in most cases, burned through that nest egg, he said.
“That money's out,” he said. “And it just recently happened.”
But in a bright spot, inventories are nearing a return to normal after serving as a major economic headwind for trucking, Costello said.
“Once we get to those normal levels — and we're pretty close — things will start to feel better,” he said.