After a Lean First Half, North American Freight Market Indicates Robust Recovery in the Second Half of 2023
- 25-May-2023 11:01 AM
- Journalist: Bob Duffler
Since the beginning of this year, the North American freight industry has been suffering from weak demand and volume. According to total expenditure data, in April 2023, total goods spending in the North American region decreased for the fifth consecutive month. Rising inflation and lower wages led to a decline in retail sales level and forced destocking of inventory which became the primary reason for the decrease in the freight volumes.
Global freight indexes indicated stability in shipping costs in the month of April, while the USA freight index experienced an overall buoyancy. Shipping costs from Shanghai to New York increased from USD 2500 per forty-feet equivalent (TEU) to USD 2849 per forty-feet equivalent unit during the month of April and sustained this price level during May 2023. Similarly, the freight of a forty-foot equivalent unit from Shanghai to Los Angeles increased from USD 1674 to USD 1856.
Improvements in the macroeconomic factors have led to a positive outlook for the market. In the month of April, the disposable personal income increased by USD 79.4 billion, and the personal consumption expenditures increased by USD 151.7 billion. The year-on-year import volumes of the North American region were down by 17.8%, but there was a 9% increase in the month-on-month import volumes from March 2023 to April 2023. In the month of April alone, the Los Angeles port handled a total of 688,000 Twenty Feet Equivalent, and it is the second busiest month this year.
The Slight surge in the import volumes can be linked to the influence of improved Disposable personal income and personal consumption expenditure, and a major proportion of these increased TEU, which were handled at the North American ports, came as imports from China constituted about 37% of the total cargo which was imported to the North American region in the last month of FY22-23.
The current month's and the previous month's economic performance has been favorable. With the current month's continued success, it is feasible that we may witness a turnaround in the North American freight market. April indicated some promise for improvement in the scenario currently dominating the market, but this comeback will not be simple due to the global economic downturn and rising geopolitical tensions.
The second half of the year could see a surge in the North American freight market. Stronger economic conditions could improve the environment for the freight market, and after a protracted lean period, we might be at the turning point where a new stage of the market could begin.