Key Insights from a Top Transport Economist

May 29, 2024

American Trucking Associations’ Chief Economist Bob Costello is a trusted source for insights on the current state and future of the freight industry. As we navigate another tumultuous year in transport, Costello’s perspectives offer valuable guidance for freight professionals. Attendees of the 2024 Food Shippers of America Conference had the benefit of hearing Costello’s wisdom firsthand during his presentation at the event. He also took time from his busy schedule to share his thoughts with the Stay In Your Lane Podcast for a series of episodes recorded live at FSA ’24. Here are some key takeaways from the discussion.

Costello believes the trucking industry is nearing a turning point after a challenging 2023, which he once viewed as the bottom for the sector. He acknowledges that many predicted a market shift in the last quarter of 2023, but change has taken longer due to factors including the resilience of small fleets. Many operators have been hanging on, trying to weather the tough market conditions as long as possible. This delay has pushed the anticipated market recovery into 2024.

“When I look back, 2023 should have been the bottom for the trucking industry. It was a tough year,” says Costello. “My timing was a little off. On thing impacting the timing now is how many fleets are going out of business.”

A significant number of fleets have also exited the market due to financial pressures, particularly in January when state registration fees became due. This exodus has started to correct the oversupply in the market. Simultaneously, key drivers of truck freight demand, which had been declining, have stabilized. This combination of reduced supply and steady demand sets the stage for a potential market recovery.

Where does transport economist Bob Costello see the industry heading? Watch the latest episode of the Stay In Your Lane Podcast to learn more.

“Fleets are going out of business. It’s a hard message for me to deliver, and I take zero pleasure in that. But in a market economy, we simply had too much supply and too little demand,” says Costello. “When exactly we’ll flip to the other side? I think the trends are setting up to get there in the not-too-distant future.”

Despite a slowing macroeconomy, the trucking sector might experience an uptick. Costello points out that the main drivers of truck freight demand have stopped declining and are poised to improve slightly. This is critical because even a modest increase in demand, combined with a reduced supply of trucks can positively impact the trucking industry.

Imports, especially from Mexico, are on the rise due to nearshoring and reshoring trends. This shift is expected to be a long-term driver of demand for trucking services. The movement of goods within North America, particularly from Mexico and Canada, is growing, which bodes well for the trucking industry.

“Mexico is still killing it. The idea of nearshoring is real, and it’s happening,” Costello says. “You don’t bring everything back from China overnight, but it’s coming. I think that will be the gift that keeps on giving.”

Shippers and carriers are adjusting their strategies in anticipation of these market changes. Some shippers are trying to secure any possible rate reductions, while others are strengthening relationships with their carriers to ensure future capacity. Meanwhile, carriers are becoming more business-savvy, opting for used equipment over new to maintain profitability.

Recent infrastructure spending has benefited sectors like flatbed trucking, which saw decent activity last year due to construction and factory building related to nearshoring. However, there are challenges ahead, such as the upcoming renegotiations of the USMCA and potential disruptions from labor negotiations and geopolitical issues.

Both carriers and shippers sense that the market is nearing equilibrium. Short lead-time orders might create volatility, signaling upcoming changes. Costello is cautiously optimistic, indicating that while a boom akin to early 2022 is unlikely, the sector is moving in a positive direction compared to a year ago.

For freight professionals, these insights from Bob Costello highlight the importance of strategic planning and adaptability in 2024. The trucking market is poised for a gradual recovery, driven by supply contraction and stabilizing demand. By staying informed and proactive, stakeholders can navigate these changes effectively, ensuring they are well-positioned to capitalize on emerging opportunities.

As we move forward, keeping a close watch on economic indicators, policy developments, and market trends will be crucial. The trucking industry is resilient, and with informed strategies, companies can weather the current challenges and emerge stronger in the evolving market landscape. For more key insights and predictions from industry thought leaders, subscribe to the Stay In Your Lane Podcast.

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