3 Minute Update: Key Transportation News
December 7, 2022
Inflation and Interest Rate Impacts as we head into 2023
We all witnessed (and experienced) surging inflation in 2022, and the logistics industry was no exception. The Federal Reserve (Fed) tried to combat the historic inflation rates with aggressive back-to-back interest rate hikes. So, where does that leave us now, and what should we expect next year?
Inflation:
Many economists expect to see a significant decline in U.S. inflation in 2023. The Fed has a target rate of 2% inflation where other economists land in the 2.9 – 3.1% range as their prediction. This is welcome news since we could peak in 2022 at the highest rate in 4 decades.[1] Food prices were 10.9% higher in Oct 2022 than Oct 2021. These are similar to the food rate increases seen between the 1970s and early 2000s. The USDA predicts food prices are expected to grow more slowly in 2023 than in 2022, but still at above historical average rates.[2]
Interest Rates:
The Fed’s plan to continue to take action in order to battle high inflation means we likely will be dealing with even higher interest rates in 2023. Currently the rate is 3.75 – 4% and it is expected to go to 5.5% in 2023. How will that impact our businesses and hiring processes as it becomes more and more expensive to hire workers and to borrow money to grow businesses? Sluggish consumer spending, a weakening labor market, and reduced business investment growth in the next year could contribute to a moderate recession. However, it’s not all doom and gloom. The U.S. economy and citizens are resilient and hardworking. We can, and will, get through any turbulent times ahead of us.
Logistics Industry Snapshot:
Fuel prices:
The gasoline index increased 17.5% over the past 12 months and the fuel oil index rose 68.5%.[3] However, the average U.S. regular gasoline retail prices averaged $3.65 per gallon (gal) on the Monday before Thanksgiving which is only $.25/gal higher than it was a year ago.[4] Crude oil prices are the primary driver of the gasoline prices and those prices have been sliding also.
Tonnage:
The for-hire truck tonnage index was down slightly in October by 2.3% compared to September. But the annual tonnage amount was up 2.8% at 116.3.[5]
Economy:
The Consumer Price Index (CPI) rose 7.7% over the last 12 months according to the U.S. Bureau of labor Statistics.2 The CPI measures the change in prices paid by consumers for goods and services.
Talk with one of our Simple Logistics freight experts and get a real-time rate quote for your next shipment. Visit us at SimpleLGX.com or call 630-385-7400.
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