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The trucking market could normalize by mid-2024, but that’s the best-case scenario, according to DAT Freight & Analytics principal analyst Dean Croke.
The data and the prediction company prospects for the coming year calls for “current market conditions to continue until the end of the second quarter, when the market should finally find balance.”
Despite the potential recovery, analysts note how obstacles continue to hinder recovery. Record profits and falling diesel prices have allowed carriers to continue operating, allowing excess capacity to linger, Croke noted.
Over the past year, there has been a net loss of 29,000 carriers with the Federal Auto Safety Administration’s revocation of the rule, which is not enough to make a significant difference in the overall market, Croke said.
Record profits allowed businesses to pay off debt and keep trucks running even when they were below the minimum interest rates needed to break even. That suggests to many that they are just one analysis away from going out of business, Croke has repeatedly noted.
“There’s this unprecedented difference in operating costs that we’ve never seen before in the long-haul sector,” Croke said.
Should excess capacity exit the market, it may not spark a recovery, analysts including Croke and Michigan State University professor Jason Miller noted.
The sluggish conditions in the descent cycle have changed the typical operating behaviors of the carriers. After pandemic-induced demand, a sluggish freight market has left companies shedding perhaps 3% or 4% of cargoes, rather than the usual 12% to 15% at this time of year, Croke said.
And while retail inventories are leveling off, American Trucking Associations chief economist Bob Costello doesn’t foresee “an extension of freight rates in the coming months,” he told the capacity report released on Tuesday.
Miller expects dry truck contract prices, including fuel, to fall about 8% in the first quarter of 2024 on a year-over-year basis, he said in a LinkedIn post this week.
For the wider economy, JP Morgan predicted earlier this month that economic growth would likely slow next year, falling from an expected 2.8% in 2023 to 0.7% in 2024.
At the same time, stricter environmental and labor laws in California are further burdening the industry, Croke said, noting changes such as a new rule effective Jan. 1, 2024, that will expand FMCSA’s interstate ELD regulations in intrastate businesses for Golden State.
Among those complications, state Assembly Bill 5 has removed owner-operators from the state. This is due to the law that prescribes to be classified as an independent contractor or employee, and the trucking industry is trying to challenge its applicability to trucking companies in an ongoing legal battle.
“I’m not sure why you’d go to California for all the money in the world,” Croke said.
In addition, the Slowing down the Panama Canal due to drought and diverted shipping traffic Avoiding Houthi attacks in the Red Sea could limit supply chains and put pressure on West Coast ports. The war in Ukraine also continues.
Despite the devastation, there is possible relief. On December 13, Federal Reserve Chairman Jerome Powell fueled investor optimism when he stated at a press conference that the federal funds rate could fell to 4.6% in 2024.
Rate cuts expected in 2024 could push housing starts and flat demand, especially in the Southeast, where about 60% of US single-family homes are built. Croke famous.
“I think the state of the trucking market will depend a lot on interest rates, how much they come down and how much that stimulates construction activity,” Croke said.