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Recession and Downturn in Freight, Transport and Logistics

Updated: Oct 28, 2022



Recession


Due to the pandemic and the Ukraine war, the transportation industry has experienced its share of ups and downs in the past two years. The economy is in a tangled position with GDP down, consumer spending up in the first quarter and the stock market is in a volatile position. Throughout these turbulent times, Watchpoint Logistics, Inc. has remained vigilant to serve our customers by being creative and agile providing solutions that help navigate the rapid changes in the supply chain. Recently, Watchpoint and other keen observers of the DOW Transport Index have long noticed a striking parallel between this sector’s trajectory and that of the broader economy.


Transport Markets


Charles Dow established the DOW transport index in 1884. It initially included 9 railroads and only two non-rail companies. Like Railroads in their hay day, the trucking sector now wields the greatest impact on markets. In fact, DOW’s transport index often serves as a predictor for the broader market trajectory. This makes sense, since consumer demand shows up early in shipping records. Historically, recessions in the freight sector often predate a more widespread economic downturn.

What’s the current state of the transport index? Boasting substantial increases in March (after suffering through a slower than normal January and February), the index began its most recent climb, peaking at $16,573 on March 29. It has steadily fallen, however, in the days that followed. Last month, the index lost 771 points closing at $15,511.30, marking the index’s worst single day in recent history. This decline, especially when paired with a coinciding loss of 4,900 jobs in the truck transportation sector, has some experts forecasting an inevitable economic downturn.


Imminent Recession?


Given the recent downturn in transport indexes, is a widespread economic recession imminent? Post-pandemic growth has sparked concern over rising inflation. And the Fed is quickly acting to cool the greatest rise in inflation the US has seen in over 40 years. Treasury Secretary Janet Yellen remains optimistic, however: "The U.S. economy has been remarkably resilient…The U.S. labor market is doing extremely well. And, frankly, I take that as the strongest indication of how the economy is doing and we've continued to create jobs back above pre-pandemic levels in terms of output."


Not everyone shares the Secretary’s glass-half-full outlook, however. The inevitable lag in market response to the Fed’s aggressive actions still has some worried about the threat of a broader recession.


Freight Market Downturn


Given the transport market’s reputation as an early warning system, it makes sense to look there for clues. FreightWaves CEO Craig Fuller has successfully predicted a number of booms and busts in recent history. Considering both contextual and historical data, Fuller’s current outlook is more pessimistic than Yellen’s. With a close watch on industry insiders, Fuller is seeing “broad agreement across multiple datasets, as well as from transportation practitioners from different segments.” All point towards a coming freight market downturn.


Given his track record for success, the data certainly deserves our attention. Watchpoint Logistics, Inc. continually monitors market signals like these so that we can adapt as needed and serve our customers well, in every economic situation.

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