Freight Recession Looms Over Global Trade
(3 August 2023 – United States) The global shipping and logistics industry is suffering severe stagnation dubbed a “freight recession” by the US Federal Reserve with severe knock on effects impacting transportation sectors
Since peaking during the pandemic and subsequent supply chain disruptions, the Drewry World Container Index tracking container rates on eight major shipping routes globally has contracted over 75 percent year-on-year as a decline in consumer spending has suppressed demand for goods. Trade finance providers and financial institutions with transport, commodities and shipping exposure have also been detrimentally impacted.
A key leading indicator of economic growth - sales of cardboard boxes - has also weakened in line with the decline in goods transport both across retail and wholesale segments. Cardboard box sales have dipped to lows not witnessed since the Global Financial Crisis (GFC) in 2008 as Packaging Corp of America reported its most weakness in sales since 2009.
"Trucking firms reported a sharp decline in freight volume this period with excess capacity in the system. Respondents indicated that there was a freight recession, and it was more difficult to find loads. Weakness in demand was primarily in consumer and industrial segments” commented the US Federal Reserve in its Beige Book May release.
"There is a freight recession, and all of us who are exposed to the freight market face the same headwind “stated Triumph Financial CEO Aaron Graft.