Economic analysts always look to performance in the freight industry to see how the US is doing. When freight and logistics growth slows, that could mean there is a recession on the horizon. This “trucking recession” tends to have ripples felt throughout all industries. However, the recent slow-down in logistics and freight has nothing to do with a trucking recession.
Last year’s growth spike was partially artificial
Last year, the trucking industry experienced high demand, which put the ball in the court of freight carriers when negotiating prices. The demand for capacity trucks to deliver shipment was also high, and trucking companies experienced revenue gains which placed the entire industry in a position for growth in 2019. But the high demand and revenue were artificially generated. Businesses and shippers ordered products and materials in large quantities from China to stay ahead of the threat of tariffs. Yes, this generated a lot of revenue across the board, but the likelihood of that cycle becoming the new normal is very slim.
Growth may not be slowing so much as normalizing
Once the crunch at the end of 2018 was over, many trucking companies started 2019 looking forward to continued trends. While there was still growth, it was at a much slower rate, and rates for shipping were decreasing. Those trends are still continuing as we pass the midpoint of the year. This is also not a sign of a trucking recession. Analysts point to the slower rate of growth as a rebound or “normalizing” trend from the recovery of last year’s spike. Additionally, a major contributor to the slow growth rates come from low commodity prices in the energy and materials sectors, which are a priority now that last year’s spike for consumer electronics, clothing, and other good is over.
There is no trucking recession, but the need for capital remains
There may not be a trucking recession, but capital to jump on growth opportunities has always been, and remains, in high demand. With growth rates slowing, trucking companies are finding that they have revenue tied up in unpaid receivables. In order to maintain healthy cash flow through slower times, trucking companies use freight factoring. Freight factoring converts unpaid receivables to cash so trucking companies can keep their cash flow moving and accumulate working capital to cover expenses and experience growth.
Express Freight Finance is a national leader in freight factoring services. Contact our offices today to free up the capital from your unpaid receivables.