J.B. Hunt Transport Services Inc., the fourth largest trucking company in the US, reported Monday first-quarter profit and revenue that missed expectations, as it explained volumes and revenue per truckload fell amid fears of a "freight recession."
"To start, we're in a challenging freight environment where there is deflationary price pressure for an industry that continues to face inflationary cost pressures," President Shelley Simpson told investors in a post-earnings conference call.
Cargo demand has been softening as consumers spend more money on services than goods. Inflation and soaring credit card rates also hurt consumer demand. We recently asked: Is a second trucking bloodbath on the horizon?
According to Bloomberg, the latest data from American Trucking Association shows the truck tonnage index dropped 5.4% in March versus February, the largest decline since Aug. 2012.
"Falling home construction, decreasing factory output and soft retail sales all hurt contract freight tonnage," said Bob Costello, chief economist for the ATA.
"The freight market is one of the most volatile markets on the planet. Hot markets can turn ice cold in a flash, particularly after the federal government and central bankers flooded our economy with so much liquidity and then proceeded to institute the fastest monetary tightening cycle in history," supply chain data firm FreightWaves said.
FreightWaves pointed out, "The freight market downturn is a thing of the past. The freight recession has come, and carriers, regardless of whether they operate in the contract or spot markets, are having to contend with it."
FreightWaves' data also shows spot rates of truck hauls have plunged over the last 12 months, tender volumes are sliding, and there's a trucking overcapacity issue.
Despite all the gloom, Ravi Shanker, Morgan Stanley transportation equity analyst, recently told clients besides "all the bad headlines and mixed data points on macro, our latest quarterly Shipper Survey keeps showing signs of improvement under the surface."
Well, that depends if the consumer can survive even more tightening of monetary conditions as the Fed is expected to increase interest rates by 25bps next month to around 500bps.