2023 Quarter 2 Trucking Industry Forecast [Navigating a Freight Recession]

Before we know it, summer will be here. We’ll be sipping lemonade by the pool, watching fireworks in the night sky while swatting away mosquitos and nursing our sunburns from long weekends at the cabin. 

But before we can get there, we have to work through the messy transition of quarter two. The snow begins to melt, and there are mud puddles everywhere. But then rain turns everything green and the smell of lilac blooms fills the air.

In many ways, the trucking industry is working through that messy spring transition too. 

We’re seeing some nice changes, so let’s talk about whether we’ll be in that bloom state by the time quarter three rolls around. 

Anderson Trucking Service (ATS) has been in this business for a long time (over 68 years to be precise) so we’re used to this market flow. 

To understand the future, we have to understand the past. We’ll explain what was happening in the trucking industry this time a year ago so you can understand where we are now. We’ll also recap quarter one and discuss what to look forward to in quarter two. 

Recapping the Trucking Industry in Quarter 1 

Quarter 1 in 2022 was the peak of the market in terms of volume and spot market freight rates. The underlying dynamics of the freight market and the economy have made for a different outlook in 2023. 

There’s typically a slowdown as we hit the winter peak. January starts slow and continues into February. In the back half of February, the market usually ramps back up as the spring shipping season begins. March is usually a solid month for rates and load availability. That’s the typical cycle. 

This year, we did see the slow January and February that is normal for a pre-pandemic cycle. However, we didn’t see the ramp-up in spring shipping that we normally see at the end of February and into March. That was the biggest challenge in quarter one. 

Part of that was due to weather challenges. Across the northern part of the U.S., we faced record snowfalls. This had a major impact on the movement of freight across the country. In other years, the weather isn’t such an agitating factor. 

The biggest takeaway we got from quarter one this year is that we’re getting closer to what the transportation industry typically looks like at the beginning of the year. We’re moving into a post-pandemic world — which means we’re ultimately getting back to what the market and freight rates were like pre-pandemic. 

Freight Availability in Quarter 1

When we look at the differences between open-deck freight and dry van freight, we see that open-deck freight held up reasonably well — dry van freight not so much. 

Enough key industries were having strong activity to keep open-deck freight stable in terms of volume and rates. Commodity prices were high last year, so industries (like the agriculture industry) are investing back in new equipment that travels on flatbed trailers. The energy industry also kept open-deck freight availability and rates more stable.  

In comparison, van freight was quite different. Dry van freight activity levels came down. Competition is higher on the dry van side because there are many more dry van carriers to compete with. As demand for freight hauled in dry van trailers came down but the supply of trucks stayed high, rates took a hit. 

Forecasting What’s to Come in Quarters 2 & 3

Again, to understand what’s coming this year, we have to understand what happened with the freight market in 2022. 

At the start of 2022, we reached a peak. Freight rates were high and freight was readily available. However, that didn’t last. 

For the rest of 2022, we faced skyrocketing inflation rates. In fact, inflation was at a 40-year high. The Federal Reserve implemented higher interest rates to try to slow spending activity. This didn’t quite work as anticipated. Instead, we saw the resilience of the U.S. consumer. Their spending didn’t change. Instead, what they spent their money on changed. 

During the pandemic, people were stuck at home. They spent their money on things like furniture and goods. In other words, they were buying goods that traveled on a truck. This kept freight demand high. 

However, when the lockdown restrictions loosened, people shifted their spending to service-based items like vacations, hotels and restaurants. They went back to pre-pandemic spending patterns.

This had a huge impact on the transportation industry. People were no longer buying things that move on trucks. The inventory retailers had in stock was no longer the right inventory. Because of this, retailers are going through a process of getting inventory levels back to a level that matches consumer spending patterns. 

Are We in a Freight Recession?

Many people believe that now, in quarter two, we’re in a freight recession. However, it’s a debated topic.

Here are some reasons people believe we’re in a freight recession: 

• Fewer goods are moving because of inventory adjustments
• Spending has ramped down on goods that are transported on a truck
• There’s less freight moving through the U.S.
• A large group of drivers entered the industry during the spot market boom, so supply outweighs demand

Because a lot of drivers joined the industry when freight rates skyrocketed during the pandemic, the supply of trucks is higher than the freight demand. Compared to a year or two ago, you’ll likely see fewer freight options as well as lower rates. 

Rates will continue to be lower than they were in the pandemic, but they’re comparable to what they were pre-pandemic. We’re entering more of a regular shipping flow. 

Open-deck rates will continue to hold up better than van rates. There will be some continued pressure on contract rates on both sides but more so on the van side. That’ll force them to come down a bit. Booming spot market rates are all but done. 

Parts Shortages in 2023

The industry as a whole is operating higher-mile trucks than usual. Breakdown times are still a little longer and parts are still costlier. 

However, what’s starting to happen is that equipment manufacturers are forecasting higher production values. Production should ramp up some, which will allow companies to purchase new equipment for their fleets. 

Bringing in additional trucks will bring down the age of the fleet. As that happens, there’ll be fewer breakdowns. This is a great change in the industry over the last couple of years. This will ultimately help drivers because they won’t have to spend as much time and money on breakdowns.

Overcoming the Freight Recession

It might be a debate regarding whether or not we’re in a freight recession. Regardless of what you believe, there are some strategies to adopt to help you work through the changes in the industry.

Try to make sure your source of freight is coming from a stable company with diverse relationships across multiple industries. Freight is still moving; it didn’t all slow down. However, if you’re with a company that’s only running one type of freight, you could be in trouble if that industry takes a dive or freight shipping slows down for them. 

As far as freight goes, dry van rates are being hit harder than flatbed rates. If you’ve been considering switching to the flatbed division at your company, now might be the perfect time to do so. 

Related: Finding a stable trucking company to work for

Thriving in Quarter Two and Beyond

In quarter two and beyond, drivers will continue to deal with lowered freight rates and less freight availability. However, truck production is slated to ramp up, which means newer trucks in fleets across the country and fewer breakdowns for drivers.

Consumers are spending their money on service-based products and retailers have adjusted their inventory to account for this. Fewer goods are being transported on a truck. Not only that but there was an increase in drivers during the height of the pandemic, which caused supply to outweigh demand. 

Because of this, some people believe we’re in a freight recession. 

You can overcome this by working with a stable company with customer-based freight and companies with a diverse range of freight. This will provide you with a good, stable freight source. 

Open-deck freight rates are looking better than van freight rates. If you’ve thought about being a flatbed driver, you may decide that now is the best time to make a move. 

Consider the pros and cons of the dry van division versus the flatbed division.