The end of America's freight recession is in sight, according to logistics executives, as retail orders and rates continue to rise.

• According to data from Motive, freight volume for the top five retailers increased by 30% year-over-year in June.
• The end of the long freight recession is in sight, with logistics executives predicting an increase in rates in the back end of the third quarter due to a reduction in trucking capacity and an increase in orders.
• JB Hunt's weak earnings report on Tuesday pressured its trucking stock, while Knight-Swift Transportation and Schneider National also experienced fluctuations in their share prices over the past month.

After the prolonged freight recession following the Covid boom in transportation rate and services, the trucking industry is turning a corner, according to logistics executives.

In June, the volume of trucking visits to North American distribution facilities for the top five retailers increased by 30% compared to the previous year, according to data from Motive.

Motive's CEO, Hamish Woodrow, informed CNBC that there is a notable increase in freight being transported to all retailers and department stores.

Woodrow stated that compared to last year, retailers were destocking, resulting in artificially low inventory. However, he noted that there is now a strong restocking trend, with discount retailers experiencing an increase of 13%-14%, while other retailers saw an increase of 7%-9%.

The Red Sea transit has become longer due to the ongoing threat of Houthi rebel attacks, resulting in a change in the rate of inventory being brought in, according to Woodrow.

The peak season for back-to-school and holiday items began a month earlier in June compared to July due to Red Sea diversions and the possibility of a longshoreman strike at East Coast and Gulf ports in October.

Retail orders rise

The retail sector has experienced year-over-year order increases through June, with department stores, electronics, and apparel retailers with bricks-and-mortar locations showing the highest growth (32.9%), followed by home improvement (24.4%), grocery & superstores (22.1%), and discount retailers & wholesalers (13%).

Despite the consensus forecast of a 0.1% increase, retail sales excluding autos rose by 0.4% in June, exceeding expectations.

The trucking industry has been grappling with flat to slow demand during the longest recession in history, resulting in bankruptcies of companies such as Yellow, Convoy, and financial struggles of Flexport. Woodrow also highlighted the need for tighter capacity in the trucking sector after a series of failures during the recession.

"The bankruptcies and capacity exits have resulted in fewer trucks on the road," Woodrow stated. "We anticipate exiting the freight recession in Q3 and rates will increase in the back end of the third quarter," he added. "I believe the holiday season will be intriguing in terms of freight prices due to the tighter truck capacity. We are currently at historic lows from a freight rate perspective, so I expect pricing pressure in early 2025."

The stock market for trucks has been unstable, experiencing a decline in value after a brief recovery in late 2023 and early 2024. Despite initial gains, the stocks fell back to their 2022 lows by May of this year.

Trucking stocks remain volatile

The freight sector, including , , , and , experienced double-digit percentage gains in the past month. However, the sector has been volatile in recent years, and a weak earnings report from JB Hunt on Tuesday evening put pressure on its shares and the sector again. Specifically, the is up 8% over the past month.

During the earnings call, JB Hunt CEO Shelley Simpson was questioned by analysts about the latest quarterly disappointment. However, she refused to commit to a turning point for the market, stating that she had been cautious in her comments for the past two years.

Other logistics executives say the low is likely in.

"Freight rates have reached their lowest point, according to Paul Brashier, vice president of global supply chain at ITS Logistics. However, we are not experiencing a complete crash and may be starting to recover slightly."

According to Brashier, the current number of loads that need to be shipped and the actual number of trucks ready to pick these loads up (truck-to-load ratio), as well as freight pricing, indicate a situation that is becoming more similar to 2019.

CH Robinson's vice president for retail logistics, Noah Hoffman, stated that discount items are the common trend among the 7,500 retailers the company serves for back-to-school items this year.

"According to Hoffman, off-price chains are doing exceptionally well in the current economic climate. The reason for this is that they offer discounts of 20% to 60% on full retail prices, which is appealing to families who need to save money on back-to-school items such as clothes and sneakers. Additionally, these bargains are also attractive to shoppers who have extra money to spend but are looking for good value."

Discount shopping fuels store competition

Retailers are placing a lot of focus on grabbing wallet share through discounting, with top-line growth being the main priority, according to Hoffman.

"According to Hoffman, the most evident way that has emerged for back-to-school shopping is the big chains holding their sales early to beat Amazon's Prime Day. Despite kids not beginning school until August or September, their parents were already discount shopping in early July."

Retailers must have their deliveries on time because freight volumes are front-loaded for the season due to the earlier back-to-school sales, as stated by Hoffman.

"If retailers lack sufficient stock, consumers will likely switch to other stores offering the deal. Similarly, parents who are managing summer childcare, camps, and other activities may not wait for school shopping later if they have already interrupted their busy summer schedule. Another retailer will likely gain their business."

Another big trend influencing warehouse-to-store transport is the bundling of back-to-school essentials.

"Hoffman stated that retailers are bundling items such as binders, folders, notebooks, crayons, pencils, glue, and scissors and selling them as a back-to-school kit. The primary objective is to increase revenue by gaining more wallet share. Additionally, even if the bundle is not cheaper than purchasing each item separately, busy parents perceive it as valuable, which adds to its worth."

According to a recent CNBC Supply Chain survey, it was predicted that during peak shipping season, 80% of respondents would choose middle-priced freight orders for back-to-school and holiday shopping, indicating a consumer seeking deals. Additionally, the freight data showed that luxury orders were expected to decline, with around 7% of incoming orders falling into the luxury category. Today, luxury retailers Hugo Boss and Burberry announced lackluster demand.

Global transportation, manufacturing supply chain pick up

The GEP Global Supply Chain Volatility Index indicates that demand conditions, shortages, transportation costs, inventories, and backlogs are increasing globally, resulting in busier supply chains.

In June, the growth of Asian manufacturing reached a 16-month peak, driven by manufacturers in Vietnam and India.

"According to John Piatek, vice president of consulting at GEP, 2024 is likely to mark the beginning of a prolonged period of growth for India, Vietnam, and other countries. He pointed out that Walmart sources approximately 25% of its products from India and emphasized that GEP's clients are experiencing significant business expansion in these markets."

According to SONAR data, ocean freight orders from China have decreased, as seen in the bills of lading recorded by U.S. customs. This movement has benefited Vietnam and India, contributing to a decrease in ocean freight orders out of China.

Rising ocean freight rates, now at $10,000 a container, could hinder the growth spurt related to inventory replenishment, despite the green shoots.

SAP Digital Supply Chain's chief revenue officer, Darcy MacClaren, asserts that the current trucking freight rates serve as an indicator of the industry's overall health. Higher inflation, which may result in increased driver wages, fuel prices, and interest rates, could potentially lead to a rise in freight rates in 2024.

"Brashier stated that not only small trucking companies but also retailers may be affected by this, and they might pass off the costs to consumers, impacting their buying habits."

Predictions suggest that consumers may face higher prices by the end of Q1 or early Q2 of the next year.

"Woodrow stated that the inventory strategy employed by companies up until now will influence their ability to cope with the current situation. Companies that have over-committed to last-minute restocking may experience a greater shock and be forced to raise prices sooner. Retailers with more diversified and flexible inventory strategies are likely to perform better."

The global transport costs indicator for January 2023 to June 2024 indicate that global transportation costs reached a 20-month high in June.

Historically, logistics costs have been passed onto consumers, and the Federal Reserve identified them as a reason for inflation during the Covid pandemic. Recently, logistics managers have told CNBC that container rates similar to those during Covid are not a possibility.