A transport analyst told the latest episode of The Freight Buyers’ Club podcast that a US economic recession will impact industry verticals in different ways and may not send freight markets into a downward spiral.
Lee Klaskow, senior freight and transportation logistics analyst at Bloomberg Intelligence, believes that even though we will probably see a US recession, destocking by retailers could see a spike in container shipping and freight demand later this year.
“We are in a freight recession right now, but we could have freight growth and still be in a technical economic recession, that’s not unheard of,” he pointed out, adding that “So, even if we do go into a recession, I don’t necessarily think it means doom and gloom.”
Klaskow noted the Bloomberg Terminal consensus rated the likelihood of a US recession at around 65%.
“I think we’re going to be in a technical recession sometime over the next 18 months, but I don’t necessarily think that it’s going to be a recession that’s going to be felt by all people all the time,” he said.
The container shipping peak season traditionally takes place in the third quarter as retailers stock up ahead of the end-of-year holiday season.
However, the normal ebb and flow of shipping demand was hugely disrupted during the chaos of the pandemic years.
Klaskow believes the 2023 peak season should not be judged against the “ridiculous” volume and freight rate highs recorded as consumer spending switched from services to products during Covid lockdowns.
“I think we’re going to have a more normal peak season. And when I say peak season, I’m not saying like a triangle angle kind of demand spike. I’m talking more of a hump kind of seasonal increase in demand; and then it slowly comes back down.” he commented.
According to Klaskow, there was ample anecdotal evidence from retailer earnings calls in May that some destocking has already taken place. He argues that static inventories do not necessarily mean retailers will not import fresh stock.
“Coles have said that they were able to decrease their inventories by I think around six percent, but then you have Footlocker that’s saying their inventories are still too high,” he said and went on to add, “I don’t think that we can paint a wide brush, and say that, ‘Oh, the inventory issue is behind us’.”
Next, he explained, “I think [inventories] are still relatively high. But I do think that they’re doing a good job at destocking and the stuff that they need for the peak season isn’t necessarily the same inventory that they have.
“So even companies with high inventory levels are going to need seasonal product to make sure that they have what the customers want when they want it.”
