The Outbound Volume Index is currently 25% above average, which means there is currently high demand for products, resulting in increased revenue for the trucking industry. Some analysts believe that there is a freight bubble forming, and that revenues will sink as the pandemic continues. But how much truth is there to the freight bubble theory?
Nothing Has Been Normal For Three Years
Untangling data to make market predictions right now is extremely difficult. 2018, 2019, and 2020 have contained a string of outliers. While some of those anomalies are connected, the truth is that the trucking industry has not seen market conditions like these to accurately predict a freight bubble.
2018 saw the trucking industry receive more revenue while shippers and brokers demanded high capacity. Just below the surface, a good portion of demand was due to threats of tariffs on imported goods that artificially caused an increase in revenue. 2019 was a hangover from 2018.
Trucking companies closed out 2018 with strong revenues and rolled out plans for growth, only to find that demand had slowed as the threat of tariffs self-corrected the market. This was a true freight bubble that caused a moderate recession in the trucking industry. While there was some recovery toward the end of 2019, no one was prepared for 2020.
The COVID-19 pandemic saw many non-essential businesses temporarily shut down, while supply chains for grocery stores and medical equipment increased drastically. The $5 trillion stimulus for the trucking industry was designed to safeguard jobs and ensure the continued success of carriers throughout—and hopefully beyond—the pandemic.
Creating a Safety Net
Just because there is no cohesive trajectory right now doesn’t mean carriers have to fly without a parachute. Whether there is a freight bubble or not, trucking companies should be building up reserves of working capital to weather any further twists the economy takes.
The best way to build up working capital is to boost cash flow through factoring. At Express Freight Finance, we offer comprehensive freight factoring services to unlock the revenue from unpaid freight invoices and give you fast access to working capital within 24 hours.
To stay ahead of the game and protect your trucking company against a possible freight bubble, contact the team at Express Freight Finance today and ask us about our factoring program.