Retailers bought so much stuff during the pandemic that it's overburdening warehouses — and it may be causing a 'freight recession,' analyst says

• Executives at trucking giant JB Hunt recently sounded the alarm about a freight recession.
• The pullback is impacting the prices of commodities such as diesel.

Executives at trucking giant JB Hunt sounded the alarm over a "freight recession" at a first-quarter conference call last week.

A freight recession basically means there are fewer trucks delivering goods across America. The pullback is impacting the prices of commodities such as diesel, a key industrial fuel, Insider's Phil Rosen reported Wednesday.

One of the key factors contributing to the freight recession is a demand slump resulting from retailers jacking up purchases during the COVID-19 pandemic, Jonathan Chappell, a senior managing director at global advisory firm Evercore, told Insider. This is even overburdening warehouses.

"The primary drivers have been over-buying for a pandemic-related demand peak that was unsustainable in any environment, let alone amid a slowing macro backdrop rife with elevated inflation and a weakening consumer," Chappell said.

The destocking process for retail inventories has been "much longer and more painful than anticipated," he added.

All these factors are also hitting freight rates. The American Trucking Association's for-hire contract truck tonnage index dropped by about 6% month-on-month to 95.8 in March, hitting the lowest level since August 2021.

The impact on the trucking network comes as ocean freight orders are falling. Consider the latest data from two of the biggest ports in the US, as scraped by CNBC.

The Port of New York and New Jersey — the longest container port on the east coast — saw container-handling rates drop from about 862,000 20-foot equivalent units in March 2022 to around 575,000 last month. The Port of Los Angeles, one of the busiest ports on the west coast, handled around 960,000 20-foot equivalent units in March 2022. That dropped to about 623,000 units this March.

Notably, the freight recession is not a US-only problem.

"The freight recession is global, starting in Europe, moving to Asia, and now most directly impacting the US market," Chappell said, adding that the recession has been ongoing "in some form" for the last 12 months.

An impending economic recession is also weighing on demand.

"We're seeing contractions in global manufacturing PMIs and I think it correlates to less spending on goods and the need to work down excess inventories," Peter Boockvar, the chief investment officer of Bleakley Financial Group, told CNBC in a Monday report. The Purchasing Managers' Index is a measure of how purchasing managers view market conditions in the manufacturing and service sectors.

Consumers are still spending on experiences like travel, leisure, and restaurants, but they are leaning towards non-discretionary goods, leading to less stuff being produced and thus transported, Boockvar added.