The coronavirus disruption to the economy last year and subsequent recovery have negatively hit freight modes, and the freight sector faces a challenging outlook heading into the rest of 2021. At the depth of the short recession last year, retail sales, shipments, and inventories dropped off as businesses closed and consumers slowed their shopping for goods except for groceries and other necessary staples. Carriers that didn’t transport essential goods saw declines in demand, leading to layoffs and idled equipment and goods.
However, the federal government’s sizeable fiscal stimulus put money back in consumers’ bank accounts while supplementing unemployment insurance payments. As a result, goods purchasing behavior reversed sharply in the fall of 2020, mostly via e-commerce, with a record rapid year-over-year pace.
The outlook for the freight sector volumes in 2021 features weaker freight tonnage, fueled by fading economic growth and slowing consumer spending on goods instead of services.
A Weak Freight Outlook
The economic conditions fueling 2021 freight tonnage are not likely to return to pre-pandemic levels of freight demand. 2021 will surely be challenging for carriers, with many seeing weaker demand than during the second part of 2020. Freight networks have insufficient capacity to take on e-commerce business simultaneously as they have additional capacity affiliated to support other supply chains.
This freight sector forecast for managers of those supply chains means a continuation of higher rates in intermodal, trucking, and air segments, but potential rate relief in carload rail rates. Capacity and operational limits will impact most modes in 2021, especially during the first half. For shippers in the industry, sales volume growth’s pace may end up as more moderate than in the second half of last year.
There are significant risks to baseline forecasts, including the potential impacts of policy and business and consumer confidence.
Intermodal Leads the Way, Trucking Drops Off
Not all freight modes of transport are expected to see the pace of decline expected in 2021. While freight tonnage forecasts expect a decrease, air and rail are forecasted to see growth, continuing their strong end to last year. The air cargo and rail tonnage will increase slightly as a reflection of the strong e-commerce-related shipping and medical supply demand.
When it comes to trucking, consumer spending will probably decrease as more people head back to their jobs and offices and spend less time at home. This development will affect trucking demand, as will ongoing weaknesses in sectors like oil and production. Within trucking, the less-than-truckload portion is expected to benefit from e-commerce demand, with tonnage increasing throughout the year.
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