Much of the chatter in the trucking industry is focused on the drop in spot rates from 2021’s precipitous heights and what that might portend for other parts of the sector. But what if the portent is merely that those other parts are—like spot rates—gradually but steadily finding their way back to what we would have considered in the range of normal prior to March 2020?
Recent comments from a few executives making the rounds at investment bank conferences have—in addition to dropping bits of knowledge regarding acquisition appetites and general pessimism about adding new equipment to fleets—shed some light on a few big trends. Two sets of statements from leaders of J.B. Hunt Transport Services and Schneider National particularly caught our ears.
Speaking just before Memorial Day to a conference hosted by Wolfe Research, Brad Hicks, J.B. Hunt’s president of highway services, provided some color about demand and what his team is hearing from customers.
“I don’t know that it has slowed down necessarily,” Hicks said before getting at an interesting nugget. “We have heard from customers that, throughout the pandemic, they were shipping inefficiently, that truckloads were going out less than full at times.
“They seem to want to get back to maximizing utilization, whether it’s a container or trailer,” Hicks continued. “Perhaps that has contributed to [fewer] truckload volumes but the overall shipping of goods has remained relatively constant for us.”
On a similar note of “get back to,” Schneider President and CEO Mark Rourke used part of his introductory remarks at the June UBS conference to note that his team is starting to see seasonality sneak into shippers’ behavior for the first time in more than two years. After being asked about any read-throughs from recent news on rising inventories from Walmart and, more notably, Target, Rourke said other big retail clients are still seeing very good activity before adding that some home improvement names and, in recent weeks, summer food and beverage customers have begun behaving as they would have before COVID-19 upended regular business practices.
“[This] is the first meaningful time we’ve seen the more normal seasonality start to return on some of the other elements that serve retail,” Rourke said.
Shippers looking to regain efficiencies lost to the chaos of COVID and a re-emergence of traditional seasonal patterns speak to progress in the economy’s quest toward normality—even if that’s slightly different going forward than what we used to before. Jason Furman, a Harvard professor and Council of Economic Advisors chairman under President Obama, tweeted another perspective that fits under that umbrella.
Looking at the ratio of inventories to sales for various parts of the retail sector, Furman pointed out that many of those numbers today are roughly in line with the climate pre-COVID when looking at trend sales rather than the pandemic-influenced high levels we’ve seen. And after two-plus years of being jostled and bounced all over by snag after shock after shortfall, trending toward trend can’t be bad.
