Despite the looming possibility of a US economic recession, different industry verticals may be impacted in various ways, and freight markets might not experience a severe downturn, according to a prominent transport analyst. Lee Klaskow, Senior Freight and Transportation Logistics Analyst at Bloomberg Intelligence, believes that while a US recession is probable, the destocking efforts by retailers could lead to a surge in container shipping and freight demand later this year. “We are currently in a freight recession, but it’s possible to have freight growth and still be in a technical economic recession; that’s not unprecedented,” Klaskow mentioned during the latest episode of The Freight Buyers’ Club podcast, produced with the support of Dimerco Express Group. “So, even if we do enter a recession, it doesn’t necessarily mean doom and gloom.” Klaskow referred to the Bloomberg Terminal consensus, which rates the likelihood of a US recession at around 65%. He further added, “I believe we will experience a technical recession sometime in the next 18 months, but it may not be a recession that affects all people all the time.”
The third quarter traditionally marks the peak season for container shipping, as retailers stock up in preparation for the holiday season. However, the regular patterns of shipping demand were severely disrupted during the tumultuous years of the pandemic. Klaskow believes that the peak season in 2023 should not be compared to the extraordinary volume and freight rate highs observed during the shift from services to products amidst Covid lockdowns. He stated, “I think we will have a more typical peak season. By ‘peak season,’ I don’t mean a triangular spike in demand. I am referring to a gradual seasonal increase in demand, followed by a gradual decline.” Klaskow pointed out that there is substantial anecdotal evidence from retailer earnings calls in May indicating that destocking has already taken place. He also argued that static inventories do not necessarily imply that retailers will not import fresh stock. “For instance, Coles has stated that they were able to reduce their inventories by approximately six percent, whereas Footlocker has mentioned that their inventories are still too high,” he explained. “We can’t broadly generalize and say that the inventory issue is behind us. Inventories are still relatively high.
However, I do believe they are doing a good job of destocking, and the items they need for the peak season may not be the same inventory they currently have. Therefore, even companies with high inventory levels will require seasonal products to ensure they have what the customers want, when they want it.”