Freight movement on U.S. roads, rails and through ports has slowed since the middle of 2022.
Trucking companies are pinning hopes for a rebound in freight demand on the second half of this year, saying their retailer customers expect to resume restocking after winding down inventories over recent months.
Carrier executives say they are hearing from their shipping customers that they expect to return to a more normal ordering cycle this year and start moving bigger volumes closer to the fall shopping season following volatile retail spending and distribution in 2022 that left them overstocked.
“The general consensus, almost unanimous, from customers that have given us feedback about their inventories has been that by the time they get through the spring, things are caught up,” David Jackson, president and chief executive of trucking giant Knight-Swift Transportation Holdings Inc., said on an investor conference call Jan. 26.
“What we expect is that through the first two quarters of this year, we’ll see this softness as a result of freight that’s already moved, and then we start to move back into a more normal cycle,” he said.
Freight movement on U.S. roads, rails and through ports has slowed since the middle of 2022, cutting off a boom in shipping during the pandemic as retailers rushed goods through logistics networks to meet strong consumer demand.
The Cass Freight Index, which measures trucking and rail shipments moving in the U.S., dropped 3.3% from November to December, the fourth-straight month-to-month decline, and the index ended the year down 3.9% from December 2021.
Inbound volumes at U.S. ports are also down, suggesting fewer goods from overseas are flowing into domestic freight networks. Imports into the ports of Los Angeles and Long Beach in December reached their lowest point since June 2020 and have been below 2019 levels since September.
The falloff began as U.S. consumers shifted their spending last year toward services rather than goods and rising inflation dampened demand at stores, leaving big retailers including Walmart Inc., Target Corp. and Kohl’s Corp. with warehouses swamped with unsold merchandise.
“Trucking is definitely down right now,” said Tom Nightingale, CEO of AFS Logistics, a Shreveport, La.-based logistics operator. “That reflects a shift in buying patterns on the part of the consumer.”
The decline is hitting earnings at the big freight carriers.
Fourth-quarter net profit at Phoenix-based Knight-Swift, the largest operator in the truckload sector in the U.S., fell 41.6% and revenue sank 9.5% in what Mr. Jackson called “the most benign peak shipping season in recent memory.”
J.B. Hunt Transport Services Inc., a bellwether for the freight market with operations across trucking and rail services, said freight-related revenue excluding fuel surcharges fell 3% in the fourth quarter.
Shelley Simpson, president of Lowell, Ark.-based J.B. Hunt, said its retail customers have told the carrier that a pullback in orders is “largely an inventory correction” driven by the shift in consumer buying patterns rather than broader weakness in the economy.
She said on a Jan. 18 earnings conference call that the company “has good signals” from shipping customers that they plan to pick up their ordering in the second quarter.
David Parker, CEO of Covenant Logistics Group Inc., a truckload carrier based in Chattanooga, Tenn., said he expects consumers to pick up their shopping when warmer weather brings people outdoors. He said he believes the turnaround will be “about a second-quarter event when the inventory levels are corrected.”
Some retailers are signaling similar confidence.
H&M Hennes & Mauritz AB CEO Helena Helmersson said in a recent interview that the first quarter of this year would remain tough but “gradually things will become better, especially in the second half of the year.”
—Trefor Moss contributed to this article.