Another symptom of a lesser-noticed bubble popping has surfaced: the prices that used semi trucks are garnering at auction are taking a sharp leg down.
Citing Chris Visser, a Senior Analyst at J.D. Power Valuation Services, shipping industry news outlet Freight Waves stated in a June 16 article that the price of model year 2020 trucks at auction had dropped significantly, down 11 percent from only two months ago in April.
And data was even worse for 2019s, dropping a staggering 15.9 percent month over month with 2018s stumbling 8.9 percent in the same timeframe.
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Visser noted, however, that the bubble is far from having finished popping: 3-to-5-year-old trucks were still garnering 57.5 percent more money than they did in May of 2021.
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“Late-model trucks,” he added, were still bringing home a stunning 82.6 percent more money than they did a year ago.
The analyst attributed the beginning of the end to “rising terminations of owner-operator authorities” combined with “a steady and notable decline in spot rates from February through May.”
“Taken alone, those two items could suggest the new owner-operators who entered the industry in 2020-2021 are now exiting the industry,” he said.
Starting in May, a trending decline of spot rates for contracting a trucker to deliver a shipment started to accelerate dramatically, falling 12.96 percent from April down to slightly more than $2.00 per mile.
The figure represents at least a 50 percent overall decline. Spot rates were as high as $2.95 a mile in the later half of 2021, and even higher in the latter half of 2020 and first half of 2021 as the economy mutated amid the effect of Coronavirus Disease 2019 (COVID-19) government overreach and central bank and federal government helicopter stimulus packages.
The fall was drastic enough to approach pre-pandemic era prices of between $1.75 and $1.95 per mile, data from Freight Waves showed.
The difference is even more significant considering the price of diesel in the United States has nearly doubled during the time since.
The stat was more pronounced because May and June are the two busiest months of the year for the trucking industry.
The article explained how it all comes together to produce early symptoms of a popping bubble, “When spot rates were paying $4 a mile and more, no price was too high for a fleet to add capacity.”
“The idea was to take advantage of record-high rates and not worry about the equipment price premium. Now owner-operators who overpaid for equipment stand to get burned,” they added.
Freight Waves also stated that the retail price of trucks at dealerships had remained constant and at “near record highs.”
VP of Act Research Steve Tam told the outlet, “Unfortunately, long-awaited reports of loosening inventories come at exactly the wrong time in the cycle…This is the beginning of the end of the cycle, which promises to be every bit as exciting on the way down as it was on the way up.”
Earlier in the month, data from big box retailers like Target, Home Depot, and Walmart elucidated the likely reason that the bubble is deflating in the trucking industry.
Data, also combined by Freight Waves, showed that consumer demand had dried up at the same time that inventory had bloated due to buyers being required to over order to maintain stock as lead times skyrocketed due to last year’s shipping and supply chain crisis.
Walmart, for example, had 32 percent more inventory year over year while sales had only increased 4 percent. Target was also in bad shape at a 43.12 percent inventory bloat and only a 3.98 percent sales increase.
Even online juggernaut Amazon suffers from the same fate. Stats showed their inventory had ballooned a whopping 46.7 percent while sales had only increased 7.57 percent.
The situation resulted in Freight Waves prophesying that a summer and fall season of heavy discounts would be on the horizon, as retailers try to stay buoyant while consumers endure annihilated savings accounts and exhausted credit lines as record inflation is only starting to wipe out the middle class.