European road transport – 2023 is marked by stagnation

The year 2023 is marked by stagnation for the transport industry. The economic slowdown felt in Europe has significantly limited the growth of the European road transport market. Is there a chance that 2024 will bring the desired recovery in the economy?

According to the Total Logistics 2023 report, the European road transport market grew by 3.5% in 2022, only to then experience a slowdown due to the ongoing war in Ukraine, ubiquitous inflation, declines in trade and poor moods in the industrial sector, all these factors were a major blow to the market recovery process. According to predictions, in 2023 the market will expand by only 1.4% in real terms. However, even this low result is not certain because, as experts note, the last quarter of this year began with a series of reductions in GDP and trade forecasts by the most important global institutions. The condition of transport is closely related to the economic condition of the markets, so the decline in forecasts cannot fill carriers with optimism.

Not very optimistic forecasts are bad news for the transport industry.

Experts from the World Trade Organization (WTO) changed their forecasts regarding the growth in the volume of global trade of goods in October. Due to the global decline in production, the WTO predicts that volume will increase by only 0.8% in 2023. This forecast is much less optimistic than the one presented by the WTO in April (1.7%). Slightly worse forecasts concern Europe, where exports of goods are expected to increase by only 0.4% in 2023, while imports will shrink to -0.7%. According to the WTO, 2024 is expected to bring improvement – it is forecast that European exports will increase by 2.2% and imports by 1.6%.

According to the latest forecasts from the International Monetary Fund (IMF) in October, global growth will slow from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024. Such forecasts remain well below the historical average (Report “World Economic Outlook, October 2023 Update”).

The latest forecasts of the Organization for Economic Co-operation and Development (OECD) and the European Central Bank (ECB) are also not very optimistic, as in September they lowered their GDP forecasts for the euro zone to 0.7% in 2023 and 1% in 2024.

Symptoms of slowdown in Europe

A not very high level of consumption leads to a decrease in the demand for the distribution of goods. One of the symptoms of the economic slowdown is the growing availability of cargo capacity on the market. September 2023 was the fifteenth consecutive month in which there was an increase in the availability of cargo capacity in Europe – according to the Transporeon index, it was higher by 9.4% compared to data from September 2022.

The increased number of available trucks on the market may cause fiercer competition for one-off orders, which is why other symptoms of the economic slowdown in Europe are currently, among others, spot rates, i.e. rates used for quick, one-off cooperation. Analyzes clearly indicate that the ongoing downward trend this year meant that in the third quarter of 2023, spot rates recorded a decline of as much as 14.8% year-on-year. This led to an anomaly in the market where, for the first time in the history of Transport Intelligence reports (i.e. since 2017), spot rates were lower than contract rates used in contracts and standing orders. Experts agree that until consumer sentiment and the general economic condition of EU countries improve, this problem may persist.

Polish carriers are European leaders despite the slowdown in transport.

It was known already in 2022 that the Polish and European transport industry would operate in economic downturn. Central Statistical Office data for the first three quarters of 2023 clearly indicate that in total 3.1% less cargo was transported in Poland than in the same period of 2022. In terms of tonnage, sea transport recorded a decline of 16.6% and rail transport recorded a decline of 3.8%. Road transport coped slightly better in these unfavorable conditions and recorded an increase, but it amounted to only 0.1%.

In 2022, Polish carriers were responsible for 20.05% of the transport work performed in road freight transport in the EU, although the decline in demand for transport services was clearly felt in Europe. Throughout the EU, Eurostat recorded a decrease in transport performance by 0.04% in 2022, but in Poland there was a slight increase of almost 1.4%. Forecasts suggest that the long-standing position of the European leader in road freight transport should not be compromised this year either.

2024 prospects.

Ti’s “State of Logistics Road Freight Survey 2023” report indicates that 84% of road freight companies are currently experiencing increased pressure on margins due to rising costs and weakening demand. The industry’s three main strategies to remain profitable include investing in technology, introducing new, better value-added services, and increasing focus on higher-margin customers.

Fortunately, experts point out several factors and indicators that can predict an improvement in the condition of the transport industry next year. Consumer confidence indicators have been increasing continuously for a year (current BWUK and ahead WWUK). Although both of these indicators are still negative (-17.9% and -8.1%, respectively, according to the Central Statistical Office data from October 2023), the gradual increases from month to month indicate that consumer sentiment in Poland is improving.

Positive conclusions can also be drawn from the latest PMI (Purchasing Managers Index) readings for Poland. PMI measures the purchasing activity of managers in enterprises and is a leading indicator that helps determine the direction in which the economic activity of the sector and the economy is heading. In October this year, production forecasts for the next 12 months improved, which bodes well for the industrial sector and gives hope to the transport industry.

OECD forecasts for European road freight transport indicate that the demand for transport services, especially those provided by heavy vehicles on international routes, will systematically increase. From 2022 to 2025, the increase measured in transport work will amount to nearly 2%, and by 2030 the increase will be over 18%. Meanwhile, Ti data shows that the overall European road haulage industry will have a real compound annual growth rate (CAGR) of 2.1% from 2022 to 2027.

Entrepreneurs in the transport industry can only hope that the forecasts will come true and that growth will not be disturbed by further unforeseen circumstances going beyond the purely economic framework, as was the case with the pandemic or the war in Ukraine.