Despite a healthy U.S. economy featuring growth in the gross national product (GNP), record highs in the stock market, and steadily shrinking inflation rates, truckload carrier companies saw their profit margins sink to a 14-year low point in the first quarter, as they continued to be mired in a freight recession, according to a report from the transportation analysis firm ACT Research.
That recession is being aggravated by an “overcapacity” of trucks in the market, forcing carriers to lower their freight rates to attract any loads, thus pulling the rug out from under corporate profits. That conclusion came from Columbus, Indiana-based ACT’s “North American Commercial Vehicle OUTLOOK,” which forecasted that sales of medium duty and Class 8 trucks would remain little changed, although sales of trailers would shrink.
“The trailer forecast receives a more substantive haircut this month, driven primarily by Class 8 overcapacity persisting longer in 2024, weighing heavily on carrier profitability in a period where carriers are more likely to continue spending on Class 8 units due to an expensive EPA mandate landing in 2027,” Kenny Vieth, ACT’s president and senior analyst, said in a release.
“There is a historically strong relationship between carrier profits and vehicle demand. Once a quarter, we get to look at the publicly traded truckload carriers’ financial performance. The opening stanza of 2024 was notably bad for the very good carriers who make up the group. In Q1, profit margins collapsed to a 14-year low 2.6% (3.0% seasonally adjusted),” Vieth said.
“While the profitability drop was in part seasonal, tractor capacity additions through 2023’s freight recession, and into 2024, have left carriers contending with below-operating-cost spot freight rates in an overcapacitized market. This in turn is holding down the group’s ability to boost contact rates, and thereby, profits.”
Wreaths Across America
