America's freight recession is showing no signs of ending

• Accuride, a truck-parts company, faces elevated default risk, S&P Global Ratings said.
• The ratings firm said tractor-trailer demand will remain weak into 2025.
• The situation is indicative of a broader US freight recession that's showing few signs of abating.

The freight industry is still rolling through a recessionary downturn, and more time is needed for the sector to kick into higher gear.

The latest example of the industry's struggles came on Monday, when S&P Global Ratings cut to negative its outlook on Accuride, a commercial-truck-parts manufacturer. The agency cited weak sales and negative free operating cash flow as reasons the company is at risk at default next year.

The agency specified that tractor and trailer production will see limited demand into 2025, noting that Accuride's low sales are fueled by persistent challenges in the industry.

"The freight environment remains depressed, which will leave credit metrics weak over the next two years," the report said. "Freight market conditions have remained much weaker than our previous expectations and underpin the reduction in our earnings and cash flow estimates for the company,"

The sector has been mired in headwinds since the pandemic, as strong COVID goods demand declined over the years that followed. In the wake of falling consumption, the industry was left with an oversupply of trucks and sliding sales.

JB Hunt, a leading trucking firm, was one of the first to warn of this "freight recession" in 2023. Its problems persisted into 2024, when the firm posted both a profit and sales miss in the first quarter. Its stock is now down 21.3% year-to-date.

Looking forward, investors should be hesitant to bet on a rebound in the second half of 2024, given that the freight industry is closely aligned with goods buying, S&P analysts wrote separately last month.

While consumption averaged 2.7% in the first two quarters, it's now forecast to slow to a 2% annual growth rate, they said. In part, interest rates will drive the slowdown and will also bear on the trucking sector:

"Some new-entrant truckers, who paid high prices for new equipment in the 2021–2022 boom, have become vulnerable in this higher-interest rate, lower-growth environment, which has led to contractions in for-hire trucking capacity," they wrote.

These reasons mean that freight volumes will end the year weaker, as freight tonnage growth trails US GDP growth. According to the S&P Global Transearch forecast, the measure will expand by just 1.7% this year.

However, that depends on the freight mode in question. Trucking tonnage will actually grow the most by 2.4%, while rail carloads will drop 1.5%, they said.