Are we finally seeing the end of the longest freight recession in recent decades? It’s the question on everyone’s mind — and has been for over a year. The trucking industry is still grappling with the long-lasting effects of rebalancing supply and demand after the wild surges in COVID-19-era consumer spending. Declines in freight volumes, inventory gluts and excess carrier capacity have strained the industry even as the rest of the world normalized. Freight tech companies have gone under; revenues for traditional brokerages continue to fall short, and mergers and acquisitions have surged as companies shed profit-draining departments.

Now, there are signs of recovery. Consumer spending is up. We’re seeing a shift towards less-than-truckload (LTL) services, and preferences for slower, cost-effective shipping. There’s increased port activity on both coasts, and even though it’s barely August, supply chain professionals are preparing for a busy holiday season ahead.

This surge in activity and the anticipation of a market recovery suggest a long-awaited stabilization of the supply chain, despite concerns about an election year and potential tariff and capacity issues.

Following are three macro trends that offer early insights, and can help businesses to stay forward-looking and proactive. 

Potential new tariffs aren’t driving current imports. There’s a view among some that fears of potential tariff hikes are driving the recent surge in freight shipments. Importers are supposedly accelerating orders to avoid these new tariffs, leading to early import surges at ports, despite high container costs as retailers prioritize timely deliveries to prevent sales losses. 

It’s essential to understand that we have many months to go before any new policies are likely to take effect. Even if a new president signs a tariff order on their first day in office, something that hasn’t happened in the last 50 years, implementation is often not immediate.

Businesses operate on forecasts, and abrupt price changes can be detrimental to companies and the broader American economy. It’s crucial to cycle out old prices and prepare for new ones in a phased manner, ensuring stability and minimizing disruptions.

Realistically, new tariffs are eight to 12 months away from impacting the market, and most companies won’t risk building up inventory in anticipation so far in advance. The public markets simply don’t reward such forward investments under current conditions. Supply chain professionals should be focused on known challenges and opportunities, rather than speculative future changes.

Capacity remains steady, thanks to resilient carriers. Many in the industry believe a continued drop in capacity looms large. The argument for such a prospect points to accelerated carrier exits from the market if they lack the capital to upgrade, repair or make COVID-19-era loan payments. Trucks purchased during the pandemic’s peak, often at inflated prices or with free capital from the Paycheck Protection Program (PPP) and SBA loans, are now a burden. Many trucking companies face loan repayments, having borrowed around $90,000 from the COVID-19 SBA EIDL program. The depreciating value of trucks bought in 2020 exacerbates this financial strain. The American Trucking Associations report an increasing average age of trucks in service, indicating challenges in maintaining and replacing aging equipment.

We hold a different view. If they made it this far, they’ve made it. Carriers still in business today have proven their resilience and stability by weathering the most brutal months in the aftermath of COVID-19, as consumer spending shifted from goods to services and travel. Several factors enabled carriers to weather the toughest times and emerge stronger: 

• During a critical period, the trucking industry received a surprising and highly unusual lift through PPP loans. These loans were largely forgiven and effectively turned into grants, allowing carriers to raise capital without diluting ownership or percentages of existing shareholders.  
• Carriers also enjoyed record revenues and unprecedented loan forgiveness from banks, which further stabilized their operations. This support positioned them for future growth and increased their savings buffer, preparing them for an inevitable return to a softer market. 

Today, volumes are picking up, which is a saving grace. LTL prices remain high due to decreased full truckload demand, but as FTL volumes normalize with the holiday peak, LTL rates should decrease accordingly. Healthy attrition has right-sized supply, and this balanced, stable capacity is driving prices above their late 2023 lows, boosting carrier profitability despite being below COVID-19 peaks. The focus must be on leveraging this stability as we move into the back half of 2024. 

There are strong signs of supply chain stabilization. Several indicators suggest a stabilizing supply chain environment, driven by economic recovery and strong consumer demand. 

Global trade activity began growing again in the first quarter of 2024, and U.S. containerized freight shipments grew 9.3% year-over-year in June, marking 10 months of growth. This rise, driven by imports of paper, capital goods and consumer goods, shows a strong market recovery. Warehouses are running low on inventory, signaling the end of supply gluts and a move towards market equilibrium. 

Despite news headlines, labor market data doesn’t show signs of an imminent recession. The U.S. economy is stabilizing with a steady 4.1% unemployment rate as of June, 2024. Inflation has slowed significantly. The Consumer Price Index (CPI) rose by only 3% in June, 2024 compared to last year, a notable decline from the peak of 9.1% in June, 2022. Additionally, interest rates are likely to decrease by November, according to the CME Group’s FedWatch tool, potentially creating a soft landing for the economy and fostering growth.

High employment means more disposable income, driving demand and economic growth. It also supports competitively priced goods due to stabilizing or lower transport and fuel costs. The decrease in inflation is likely to boost consumer confidence, as it indicates that price pressures are easing, making everyday goods and services more affordable.

Monitoring these indicators closely and adapting strategies is crucial for maintaining stability and growth in the coming months.

Increased freight shipments, stable capacity, strong employment, low interest rates and slowing inflation point to a stabilizing environment for supply chain. The path ahead requires strategic adaptation to these evolving conditions. By focusing on present opportunities and capitalizing on newfound stability, the industry can navigate the challenges and seize the opportunities that lie ahead. The freight sector is poised for a period of growth and stabilization, provided it remains vigilant and responsive to key economic indicators.

Aaron Peck is chief executive officer of Mothership.