The Impact of Inflation on the Transport Economy

May 25, 2022

Shipping Inflation

It can be hard to get a handle on the current state of the freight economy. Alongside continued supply chain interruptions, labor shortages, and many other ongoing issues, one area of concern seems to rise above the rest: inflation.

The transport field is operating in uncharted waters with inflation lingering around eight percent. Many stakeholders across every part in the industry have never done business in such a high-inflation environment. With costs skyrocketing at an unprecedented rate, budgeting becomes a serious challenge.

“I can’t recall when we’ve seen inflation this high in the past 20-plus years,” says joe Lombardo, President and Founder of the strategic transportation consulting firm Ege Avenue Associates. “It’s a learning experience for a lot of people. How do you react? How do you budget?”

How is inflation affecting the transport industry? For the answer to this question and more, watch Episode 11 of the Stay In Your Lane Podcast.

Signs of relative economic stability from the pandemic era are beginning to waver in the face of soaring inflation. The ecommerce boom that accompanied the lockdowns has entered a nosedive thanks to reduced overall consumer spending. Production from OEMs is also slowing dramatically due to increased cost of goods and continued labor shortages in certain sectors.

The cost of diesel fuel is up by a staggering 75% compared to the same time last year, reaching the current national average of $5.50 per gallon. With increased fuel prices passed on to consumers in the price of goods, skyrocketing diesel costs are another significant driver of inflation.

The risk of entering a period of recession looms large as the federal reserve raises interest rates to combat rampant inflation. High fuel prices, decreased consumer spending, and a shortage of drivers and trucks could spell trouble for the transport industry in the long term.

What does high inflation mean for the future the logistics industry? Find out by watching Episode 11 of the Stay In Your Lane Podcast.

Small operations may be hit the hardest by these emerging stresses to the market. Higher equipment maintenance costs resulting from a lack of new truck inventory and record fuel prices will disproportionately hurt the bottom lines of independent operations. As expenses mount, owner-operators might have to make the difficult decision to sign on with the larger carriers or leave the industry altogether. This attrition will further weaken an already taxed supply chain.

In normal times, any one of the many issues faced by the modern transport industry would be cause for concern. Today, we see one problem feeding into the next in a virtual avalanche of difficulties, with no clear solution in sight. In the face of all this turmoil it is more important than ever to work with partners you can trust. Count on Triple T Transport to deliver the world-class 3PL brokerage services your operation needs to stay ahead of the next disruption, whatever it may be.

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