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For many, the trucking industry in 2023 can best be summed up by a single word: recession. While analysts and industry experts had been predicting a recession since the beginning of 2022, primarily due to a surplus in trucks and drivers competing over reduced volumes, the effects of the so-called “trucking bubble” bursting were possibly more severe than originally expected. 

Making matters worse, outside factors like inflation, economic instability, plummeting rates and record-high operating costs created challenges that many carriers couldn’t overcome. By the end of Q3 last year, an estimated 35,000 new trucking companies had shut down, which was about 10,000 more than in 2022 and about 20,000 more than in 2021. 

The trucking industry is famously boom-or-bust. It’s a matter of when, not if, the market will rebound, but there has been much speculation about when that time will actually come. Will the market finally begin to bounce back in 2024? Read on to learn about what recent industry trends and forecasts can tell us as we look to answer that question.

Background on the Current Trucking Conditions

As we entered the second half of 2023, there was optimism that conditions for carriers could improve during the first half of 2024. However, as the year came to a close, that optimism was replaced by feelings of caution and uncertainty, as signs pointed to the market remaining soft for months to come. This caution comes as a result of mixed signals within freight markets and the U.S. economy as a whole. 

On the positive side, inflation has been falling, diesel fuel prices have stabilized and the economy has continued to expand. And despite record-high operating costs in the previous year, which forced many carriers out of the industry, these factors have allowed the companies that remained to perhaps stay in business longer. 

The problem, however, is the fact that freight volumes and demand remained low even as consumer spending has remained steady. A major part of the issue is that the truckload market still has too much capacity, which stems from the number of authorities that remain in business from the pandemic-driven boom that took place in 2020 and 2021.

This highlights an unfortunate reality about the state of the market. The improved conditions have allowed some companies to continue their operations, but there’s still far too much competition. It creates a situation where more will have to leave industry in order for the market to improve, which comes with a significant cost for owner-operators and trucking companies.  

How Will the Trucking Market Perform in 2024?

Despite experts agreeing that the market should rebound in the not-too-distant future, it’s currently unknown when signs will actually begin to show. The mixed signals provided by industry markets and the U.S. economy to end 2023 have continued into the new year thus far. 

As a result, several experts have started to predict that 2024 could be a very unremarkable year where conditions don’t necessarily worsen, but any progress made will be incremental at best. Why is recovery happening so slowly? There are two primary reasons. 

Excess truckload capacity is still an issue.

As mentioned, the COVID-19 pandemic led to a massive number of new entrants into the market. In fact, the number of carriers receiving FMCSA authorization increased by over 128,000 from 2019 through 2022. The influx of new authorities made it harder for carriers to move freight and led to the continued ongoing problem of significantly reduced rates and overstocked inventories. 

In Q4 of 2023, however, the FMCSA saw its highest net decrease in carriers, with over 2,500 leaving the industry. Additionally, the total number of newly authorized carriers reached its lowest point since June 2020. 

The vast majority of those both entering and leaving the industry are fleets with two or fewer trucks. This points to a correction in capacity that should continue in the coming months, though at a very gradual rate. 

Consumer and commercial demand continues to lag.

While capacity correction will have a positive impact on freight markets, decreased competition by itself likely isn’t enough to drive a recovery. A rebound in freight markets will likely involve reduced capacity coinciding with increased demand levels. Even though consumer spending has remained stable, though, it hasn’t been enough to drive down inventory levels as demand has shifted more toward services and experiences rather than goods.  

A major reason for the pandemic-driven boom in freight markets was the fact that consumers were stocking up on goods in case they were needed in emergency situations. This led to an increase in global imports and manufacturing output. However, recent months have shown that consumer spending and inventories have normalized to levels closer to that of the pre-pandemic era. 

Unfortunately, an increase in consumer demand appears unlikely in the immediate future. High interest rates on payments like auto loans, credit cards and more, as well as price increases on staple goods like food, may lead to reduced spending. With that said, the Federal Reserve is set to lower interest rates at some point during the year, which could lead to increased consumer and commercial spending.

When Will the Market See a Recovery?

Though the market has yet to show true signs of a rebound, several industry experts are confident that conditions are stabilizing. While progress has undoubtedly been slow to this point, the beginning of the year has shown some promise.  

With that said, demand is typically softest in Q1 and the market is expected to remain sluggish for the first half of 2024. More pessimistic outlooks say that a full rebound might not even come until 2025. This is despite the fact that rates are trending toward normalcy and there is an increasing number of authority revocations. 

How will we know when the market is starting to turn? One of the best indicators is tender rejection rates. The pandemic saw rejection rates reach higher than 20 percent on average, and this past year saw the average dip as low as 2.5 percent in May 2023. This means that carriers were accepting just about any load offered to them just to get business, often at a lower rate and on less optimal routes. When rejection rates are higher, it will signal that capacity has corrected.

Key 2024 Trends Carriers Need to Know

In the meantime, it will be a game of survival for many carriers. Better times are ahead for the trucking industry and 2024 will be an improvement over the previous year, but progress will be incremental. It’s important that, as the market continues to rebound, companies stay mindful of current trends in order to remain competitive. These trends include:

  • Potentially higher operating costs – While there is hope that fuel prices could decrease over the next two years, insurance costs have steadily increased on a yearly basis with no signs of decreasing. Ongoing issues like high driver turnover, lack of truck parking and regulatory changes and compliance could further add to these costs, making it important to emphasize driver retention, safety and training.
  • Increased importance of technology and optimization – One way to enhance both your fleet’s compliance, safety and efficiency is to utilize recent advancements in trucking technology. Data-driven decision making is becoming increasingly necessary for businesses to make informed choices. Investing in this technology will be critical for securing business going forward. Further, working with shippers and brokers who have the technology to improve visibility and route optimization for the carriers they work with will be beneficial. 
  • Possible supply chain disruptions – The past few years have shown how vulnerable our global supply chain is. With weather patterns becoming more extreme and geopolitical tensions always prevalent, it’s critical to develop contingency plans in case of a disruption. This can include widening your pool of suppliers and using predictive analytics to anticipate potential issues that may occur.   
  • Improved cybersecurity measuresBrokerage fraud and other cyber scams cost the trucking industry an estimated $800 million last year, and the methods used by criminals are only evolving. While federal legislation may help, it’s important to take steps within your own organization to prevent fraud. Investing in employee training programs and checking the credit history of your customers and partners can help ensure your fleet doesn’t take unnecessary financial and reputational hits. 

Explore our website today to get more industry insights, or reach out to a representative for more information on how to maintain your company’s financial health through market uncertainty. 

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