Trucker Bust Begins As Oversupply Plagues Freight Industry, Spot Rates Crash

Recent economic reports from the trucking industry show the transportation recession continues to deteriorate through summer, with no end in sight. This is the second transportation recession since the 2008 crash, outlining that freight is a very cyclical business.

Freight companies are dealing with a hangover from last year's economic sugar high, driven by President Trump debt-fuelled tax cuts and a trade war, that forced importers to build inventory ahead of tariffs. This led to higher demand for big rigs in 2018 as imported items had to be shipped from the port of entries to warehouses.

Freight companies used 2018 profits and the earnings from the 2017 tax cuts to record one of the largest orders for new trucks in some time, resulting in an explosion of overcapacity while cargo volumes started to slide in late 2018, reported The Wall Street Journal.

The global economy started slowing in 1Q18, a quarter or so before President Trump launched the first significant punch in the trade war against China. This means an industrial slowdown around the world was structural and unrelated to tit-for-tat tariffs between both countries. By August 2018, ISM manufacturing and UST5Y peaked and had a drastic reversal, due to the start of a domestic industrial slowdown.

https://www.zerohedge.com/news/2019-07-29/trucker-bust-oversupply-plagues-freight-industry-spot-rates-crash