FREIGHT RATES SLIP ON SLOWING DEMAND

As consumers spend less (see “Credit Card Spending Falters” in this issue), the cost of moving goods to stores and warehouses also is falling, The Wall Street Journal reported.

Companies are renegotiating the high-price freight contracts they signed when stores were unable to get merchandise fast enough to meet demand.

Now one major U.S. importer has reported revising freight contracts 15 to 20 percent below prices set six months ago.

The situation is a stark reversal from the beginning of this year, when retailers and manufacturers were signing shipping contracts at premium rates to ensure they would move goods in time for the fall and winter selling seasons.

Last year, a shortage of shipping containers and truck drivers left shipments sitting in ports and on freight docks for weeks at a time, with shipments often arriving after a selling season had passed.

During the COVID War, spot and short-term freight rates were higher than those written into long-term contracts. In March, that spread began to narrow; last month, short-term rates fell below long-term costs.

TREND FORECAST: The softening freight costs will help ease inflation’s pace to some degree. However, shipping costs remain many times more than before the COVID era.

We documented falling freight-hauling prices in “Demand for Truck Hauling Eases Unexpectedly” (26 Apr 2022) and “Rates to Sail Goods from China to U.S. Fall By a Third” (28 Jun 2022).

The value of consumer goods the U.S. imported in May was $1.5 billion less in May than April, the U.S. Commerce Department reported. Imports are likely to continue to fall, the National Federation of Retailers said, as consumers cut spending amid higher interest rates and ongoing inflation.