Carrier Fallout: A Shift in Market Dynamics

The exodus of carriers from the market in 2023 has sent ripples through the industry, fundamentally altering market dynamics. With a staggering 88,000 carriers exiting the scene, competition has diminished significantly, a silver lining for the remaining carriers: more freight to go around. The reduction in carrier numbers has led to increased demand for their services, evidenced by a notable uptick in SPOT loads, which have surged by 15% since November. 

Typical Freight Cycle: Understanding Market Patterns

The freight industry operates within the bounds of cyclical patterns, and understanding these cycles is key to forecasting market trends. Traditionally, the freight cycle spans approximately 18 months, characterized by alternating periods of prosperity and downturn. This is exemplified in Coyote’s graph below that spans from 2007 to 2019.

However, the recent bottoming-out phase has extended beyond this typical timeframe, leading industry leaders to believe that the market has reached its lowest point and is poised for a rebound by the second half of 2024. This anticipated upswing bodes well for carriers and stakeholders preparing for increased demand and improved market conditions.

It is wise to note that the same reasoning is what caused the industry to hope for a market turnaround in 2023. Due to the unprecedented events and effects of COVID, war in the Eastern part of the world, and climate change affecting shipping routes, leaning on the typical freight cycle as evidence for a market turnaround isn’t enough to depend on. 

Dropping Inflation: Economic Implications for Spending

Economic indicators, such as inflation rates, serve as barometers for consumer behavior and spending patterns. According to the Federal Planning Bureau and their graph below, we should see inflation rates decline in the second half of 2024. 

The gradual decline in inflation rates signals a positive shift in Americans' purchasing power, paving the way for increased spending on transported goods. The overall durable goods economy (manufacturing, housing, large appliances, consumer credit limits) needs to increase before we can expect to see a more prosperous freight market. Moreover, historical data suggests a correlation between economic prosperity and election years, further bolstering expectations for a resurgence in the freight market. As inflation continues to trend downward, industry stakeholders anticipate a corresponding uptick in freight demand and shipping activity.

Conclusion

The convergence of factors such as diminishing competition among carriers, market cycle patterns, and economic indicators points towards a forthcoming turnaround in the 2024 freight market. While challenges and uncertainties persist, the groundwork is being laid for a resurgence in demand, profitability, and growth. We are hopeful for that to be the case, but we don’t allow our hope to become an expectation. As we navigate the complexities of the freight industry, analysis and foresight serve as guiding beacons in charting our course forward - for ourselves, our customers, and all stakeholders alike.