LM    Topics     Logistics    3PL

SMC3 panelists address potential for a recession

The possibility of the economy entering a recession, at this point, appears to not be a matter of if it occurs, but when will it occur. That was a key theme in a session this week at the SMC3 JumpStart 2023 conference held in Atlanta.


The possibility of the economy entering a recession, at this point, appears to not be a matter of if it occurs, but when will it occur. That was a key theme in a session this week at the SMC3 JumpStart 2023 conference held in Atlanta.

Brent Hutto, Chief Relationship Officer for New Plymouth, ID-based Truckstop, explained that it is likely there will be some sort of recessionary activity in the economy, most likely because it is probably needed. And he said that a major driver for it is related to monetary policy actions by the Federal Reserve to stave off inflation, which, while still at high levels, is starting to inch down, with inflation impacting small carriers, large carriers, and consumers alike.

“To me, it is more of a corrective action more so than anything else, because things ran so high during the pandemic for so long,” he said.

As for the timing of a 2023 recession, Hutto said he thought it was likely to occur in the second quarter or early into the second half of the year.

Washington-based American Trucking Associations (ATA) Chief Economist & Senior Vice President of International Trade Policy and Cross-Border Operations Bob Costello said the most likely scenario, as it relates to a recession, is that it will be mild and fairly short, with the caveat that the timing for it could be somewhat tricky, adding that December inflation and retail sales data could portend it as occurring in the first quarter.

“Housing is already in a recession, and manufacturing [output] and retail sales are down,” he said. “It could still be a first quarter event, but it is going to be relatively short and mild despite the Fed being very aggressive. But the freight economy is worse, and the reason the freight economy is worse is because if you go back to the pandemic, we were stuck at home, not going to movies or sporting events or traveling and we just started buying stuff. And all the carriers started hauling that stuff and delivering it. We are now on the reverse side with people back to going on vacations and to restaurants, among other services-related activities, and that is eating into goods spending. But now on top of that there is a recession in housing, and manufacturing, which has grown the last few years, is starting to contract. If you add all of that up, then you have a freight recession, and that is essentially what is going on.”

Addressing the current state of inventory levels, Costello said it is somewhat nuanced, in that in looking at inventory-to-sales ratio data from the U.S. Census Bureau, it does not seem like inventories are “too bloated,” with inventory levels heading back to pre-pandemic levels.

“If you peel it back on the retail side, it is really the big box retailers are the ones with too much inventory, and that is a cycle that is also a headwind for freight,” he said. “It is improving but still ahead of where we were but moving in the right direction.”

Overland Park, Kan.-based LTL carrier Yellow Transportation Chief Commercial Officer Jason Bergman labeled the current state of the market as “extraordinary,” with some parts of the economy doing better than others, or a K-shaped situation.

For general merchandise retailers, he noted that regardless of where their inventory levels stand, they will need to be replenished, with it being a matter of by how much.

And he addressed other key metrics that have the potential to factor into a potential recession, including recent declining manufacturing data, which he said could leave manufacturers a lot more conservative about building up inventories into the spring.

“It goes back to the bullwhip effect, with inventories being too much or not enough, and [shippers] need to figure out what that mix is,” he said. “There are other factors, too, like single-family housing down, while non-residential construction is doing very well.”


Article Topics

News
Logistics
3PL
Transportation
Motor Freight
Events
SMC3
3PL
American Trucking Associations
ATA
Events
Inventories
Inventory-to-Sales Ratio
JumpStart 2023
Logistics
Motor Freight
Recession
SMC3
Transportation
Truckstop
Truckstop.com
Yellow
   All topics

3PL News & Resources

GXO heralds debut of GXO Connect in the UK
Q&A: Michael Farlekas, CEO, e2open
MHI issues annual State of the Industry report at ProMat 2023
6 River Systems rolls out mobile fulfillment app to extend picking options outside of its AMRs
February intermodal volumes see annual declines, reports IANA
Q&A: Adam Satterfield, CFO, Old Dominion Freight Line
DSV announces acquisitions of S&M Moving Systems West and Global Diversity Logistics
More 3PL

Latest in Logistics

GXO heralds debut of GXO Connect in the UK
Yellow, Teamsters union butting heads a year before contract deadline
Industry stakeholders call on White House to aid in West Coast port labor talks
How to make sure your warehouse automation gives a high ROI
Gain Greater Visibility With ERP & TMS Integration
Q&A: Michael Farlekas, CEO, e2open
Three layers of forklift safety: Promoting operating best practices
More Logistics

About the Author

Jeff Berman's avatar
Jeff Berman
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review and is a contributor to Robotics 24/7. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis.
Follow Logistics Management on FaceBook

Subscribe to Logistics Management Magazine

Subscribe today!
Not a subscriber? Sign up today!
Subscribe today. It's FREE.
Find out what the world's most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today.

March 2023 Logistics Management

March 14, 2023 · We speak with a number of logistics experts to capture their views on the overall impact that e-commerce is having on moving the nation’s freight. One thing is for certain: The current level and speed of churn has irrevocably altered the pattern so many had become accustomed to managing.

Latest Resources

How to make sure your warehouse automation gives a high ROI
Unlock Your Warehouse's True Potential with Automation - Learn the Essentials of Automating Your Warehouse for Maximum Return on Investment.
Gain Greater Visibility With ERP & TMS Integration
Three layers of forklift safety: Promoting operating best practices
More resources
 


Latest Resources

Warehouse/DC Automation & Technology: It’s “go time” for investment
Warehouse/DC Automation & Technology: It’s “go time” for investment
In our latest Special Digital Issue, Logistics Management has curated several feature stories that neatly encapsulate the rise of automated systems and...
Why accurate, real-time location data is a must for efficient operations
Why accurate, real-time location data is a must for efficient operations
Find out how next-generation workforce management apps use accurate, real-time location data to power successful operations in this webinar with Radar CEO...

Should you lease or buy your lift truck fleet?
Should you lease or buy your lift truck fleet?
Leasing critical equipment like lift trucks can offer flexibility, but some lease terms can be complex and costly if you’re not...
2023 State of the Third-Party Logistics (3PL) Industry Report
2023 State of the Third-Party Logistics (3PL) Industry Report
In this year’s Third-Party Logistics State of the Industry Report, you’ll learn about our top trends for the year and...
2023 Rate Outlook Webcast: Will shippers catch a break?
2023 Rate Outlook Webcast: Will shippers catch a break?
In this annual webcast, group editorial director Michael Levans hosts our panel of logistics and freight transportation analysts who share their insights...