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Can the trucking industry predict a recession?


The trucking industry shows when people are buying more or less.

Between expert predictions and casual conversations, it seems as if everyone is looking for ways to prove whether the country is heading into (or is already in) a recession. There are numerous indicators and trends that can be pointed to, and history to be studied and used as a model moving forward. One of the ways that economists and other industry professionals make these predictions is looking to certain industries and their current status, one of which is trucking.

The trucking industry's role in predicting a recession
According to Reuters, trucking has, in the past, shown to be one indicator of the state of the U.S. economy. The reason being that it shows when people are buying more or less. When people buy less, it means that less shipping is needed. Less shipping means that there's less business activity, in general. Reuters references data from the trucking company Convoy, which showed that economic recessions followed 6 of the 12 trucking recessions since 1972. News Nation reports that truckload demand has fallen 58%.

Some are saying that this decrease in demand shows that we're heading toward a recession. While nothing is for certain, it's difficult to argue with those who are pointing to a downturn in spending (and shipping). However, the elements that can impact the trucking industry are largely unpredictable, and it's not to say that things couldn't pick back up and go in the other direction opposite of a recession

Spot market versus contract market
There are two main ways that the trucking industry operates — through the contract market and spot market. With the contract market, this refers to businesses and corporations that have long-term contracts with truckers or trucking corporations. As for the spot market, that refers to operations per project or series of projects and uses brokers or intermediaries to fill business needs. The spot market dictates how much drivers are paid and the value of trucking based on demand. For example, when there is a trucker shortage, that means truckers are paid more because there is a higher need and less competition.

The contract market is much more predictable and is typically used by businesses that are keenly aware of just how much purchasing and shipping they do each month or year. The spot market, however, is much more reliant on the fluctuations of the market. The spot market is what people are looking to when analyzing the direction of the economy. The spot market, however, tends to go up and down quite a bit, so the findings aren't always reliable. 

The bigger picture
Those in the trucking industry can use trends to their advantage to help plan, but at this point there is no reason to panic. When it comes to predictions, they're exactly that — predictions. There is no hard and fast way to say for sure whether a recession is coming. However, using these tools and data can help you and your business prepare if that is the case.

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