Motive: Freight market to see further shrinking in Q4 and early 2024

The freight market is on track to see further shrinking and restraint continuing into Q4 and early 2024, as it continues to rebalance following the economic surge driven by the pandemic and oversupply of trucking capacity, according to a forecast from vehicle technology provider Motive.

The forces that are causing that shift include market volatility, climbing diesel prices, and a slight slowing of carrier exits from the market, the California company said today in its “Motive Holiday Outlook Report.”

As carriers try to adjust their plans accordingly, Motive says operational efficiency is one of the only things within a business’s control in this economic climate, making it a key lever for carriers having a happy new year.

Despite the challenging forecast, Motive also cited two variables that helped logistics and transportation providers to weather the stormy conditions. First, the summer months brought a short-lived reprieve in terms of net carrier exits from the market and new carrier starts. And second, driver retention saw a 5% improvement from 2022 to 2023. Although overall churn remains a challenge, more drivers are staying put, particularly in industries like passenger transport, retail, and warehousing.

One of the most important sectors driving those changes is the health of the retail sector, which also showed a glimmer of hope for improvement. Motive’s “Big Box Retail Index” improved in September, indicating that retailers are slowly replenishing warehouse inventories in preparation for the upcoming holiday shopping season. In addition, retailers that don’t sell consumables like groceries may already be matching inventories to demand more closely, which would be a step toward stabilization of the market.

However, Motive concluded that “we foresee retailers staying cautious, waiting until the last minute to match inventory with demand due to the prevailing risk-averse climate, even though the holiday season may pick up speed compared to 2022.” So with capacity running higher and supply chains operating leaner, carriers should anticipate that retailers are likely to ramp up their inventories closer to when they’re needed for the foreseeable future.

Indeed, throughout 2023, retailers continued the trend of stocking up closer to peak demand periods rather than holding excess inventory for extended periods before holiday surges, the report said.

Motive saw slight improvement in September as it tracked carrier trips to warehouses of the top 50 retailers in the U.S., which continued a gradual upward trend following record lows in Q1 2023. They conclude that after spending the first half of 2023 depleting excess stock, this data suggests retailers have slowly begun building inventories back up ahead of the 2023 holiday shopping season. And more broadly, the biggest retailers are moving towards better alignment of inventories with demand, which would be a step toward stabilization of the market.