The U.S. economy in 2023 will start with weak demand met with mostly adequate inventories. Shippers can expect sufficient freight capacity and lower rates as well as improved distribution center and warehousing availability. While service providers have been adding capacity since late 2020, the situation will be as much a result of changes in demand as it will be due to increases in supply.
International Trade to Weaken
International trade is forecasted to slow in 2023 with the value of U.S. imported goods declining 1.2% for the year (compared with the 16.4% increase estimated for all of 2022 and the jump of 23.4% seen in 2021). The U.S. will still run a trade deficit, but it will shrink, as exports will not slow as much as imports. The 2023 pace of goods exported is forecasted to grow 1.4%, compared with the 19.1% growth estimated for 2022. The economies of most U.S. trade partner countries, especially in the more advanced countries, will be in recession in 2023, which typically would weaken demand for U.S. exports overall. However, U.S. energy and agriculture exporters will continue to find good opportunities in global commodity markets disrupted by the Russian invasion of Ukraine. Despite the overall weakness in global trade demand, competitive U.S.
Weak U.S. Freight Outlook
Based on the projected demand for goods and inventory levels in our recession-and-recovery baseline forecast, we expect 2023 U.S. freight volumes to start weak and end the year stronger. The duration of the painful downturn is projected to be limited, where consumption and inventory rebuilding in the second half of 2023 will lead to demand and freight growth for the year as a whole. The S&P Global Transearch baseline forecast overall is for freight tonnage to increase 1.36% for 2023.
Not all freight modes have the same prospects, however. For rail, the range of 2023 tonnage growth is from a small 0.15% increase for rail carload tonnage up to a rebound of 2.9% for intermodal rail tonnage. The intermodal rail recovery is in comparison to 2022 when systemwide congestion and threats of a strike drove customers away. The baseline trucking demand forecast is for recovery by year-end, resulting in 2023 tonnage growth of 1.54%. Air cargo tonnage growth is forecasted slower than in recent years at 3.0% due to slowing e-commerce growth. The maritime baseline forecast includes the assumed recovery of water levels in the Mississippi River System, enabling a rebound of 1.4% in tons compared to suppressed 2022 levels. These Transearch modal freight tonnage forecasts for 2023 are summarized in Figure 1.
For supply chain managers, the baseline freight forecast implies a return towards having market power. Expect softening freight rates, tempered by continuing elevated wage levels and high diesel prices, which will both raise the floor on operating costs. However, after almost three years of running at capacity and operational limits, freight markets will see constraints ease in 2023, especially in the first half of the year.