According to U.S. Xpress, a truckload carrier based in Chattanooga, Tennessee, the fourth-quarter economic outlook predicts continued high freight demand with some caution.
“Freight will continue to flow at a breakneck pace for the foreseeable future,” the Monday report stated.
The view expressed concern about the general economy, particularly the path of consumer spending, and predicted that the current freight cycle would terminate due to diminishing demand versus capacity growth.
Consumer spending remained robust over the summer thanks to government stimulus and unemployment benefits. However, according to the research, it’s difficult to tell which headwinds — mid-single-digit inflation, supply chain bottlenecks, or declining disposable income – will have the most significant impact on future spending.
“Consumer demand has remained high in nominal terms relative to our supply chain’s ability to keep up, particularly in the face of productivity issues and workforce shortages.” However, without wage growth, consumer purchasing power will be eroded in real terms if inflation takes hold and interest rates increase.”
AccordingU.S. Xpress (NYSE: USX), the need to replenish depleting stockpile is a catalyst. “Inventories are still low in comparison to sales, and they will most certainly stay depleted into the second quarter of 2022.”
However, according to the business, any future slowdown will most likely be due to consumers pulling back rather than a significant rise in truck supply.
“It appears that if inflationary pricing relief comes soon, it will come in lower freight volumes rather than increased truckload capacity.”
The reasons, according to the paper, include truck production bottlenecks and a driver shortage. Semiconductor and parts shortages continue to hamper production plans, with the American Trucking Association estimating a driver shortage of 80,000 people and rising.
According to U.S. Xpress, the Drug and Alcohol Clearinghouse will evict 100,000 drivers by the end of the year, and infrastructure spending “will undoubtedly play a factor in driver recruitment and retention trends.”
The analysis found that eliminating enhanced unemployment benefits and numerous rounds of driver pay increases haven’t “changed the needle in a meaningful way.” “Truth be told, carriers across the country have tried everything they can think of to get drivers back on the road, but to no avail.”
According to U.S. Xpress, supply chain congestion and delays unloading equipment at shipper facilities dilute per-mile pay increases, resulting in fewer revenue miles driven.
“Higher wait times and other inefficiencies, which increased driver pay scales would otherwise recover, are one of the most challenging realities of supply chain bottlenecks and labor shortages.”
According to the research, even recent unfavorable data factors, such as third-quarter GDP, inflation, and wage decreases, show a freight market well ahead of past cycles.
“The most recent round of economic statistics suggests that the economy, and consequently freight volumes and rates, are slowing. However, even if the fourth quarter of 2021 is softened,’ it will still be outstanding compared to even the best freight markets of the past.”
