If you’ve been paying attention to the financial news in recent months, you’ve likely noticed a concerning trend in the number of economists and financial experts discussing the possibility of an economic recession this year.
While nothing about economics is 100% predictable, it’s essential to know how likely a 2023 downturn is, what trends it might bring to the car shipping industry, and how to minimize any potential damages ahead of time.
First, let’s note some current indicators that point toward a recession on the horizon.
One crucial negative sign is a decrease in the industrial production index. While this sign alone doesn’t forecast a recession (and several other economic signs show the economy isn’t currently struggling), it’s still a red flag for economists and financial analysts.
Another factor to keep a watchful eye over is inflation. As almost everyone has noticed, inflation has dramatically increased in the past few years and continues to show an upward trend.
High inflation isn’t always an indicator of an economic downturn, but analysts generally see it as an unhealthy financial trend.
To know how likely a recession this year is, we must look at what the economic experts say.
Generally, economists remain optimistic about the current state of the US economy. They point to indicators like a solid domestic labor market, gains in personal income since their decline last year, and overall payroll growth as signs of a robust economic situation.
However, recessions can occur quite rapidly. Just because the experts don’t anticipate an immediate downturn doesn’t mean it’s impossible that we’ll see a recession this year.
Fortunately, the used car market seems relatively formidable against recession factors.
This resistance is primarily a result of two main variables: Steady prices and exceptionally high demand in the current market.
Used car prices don’t tend to decrease substantially during recessions because many consumers switch from purchasing new cars to used models.
Likewise, the automobile market presently has a much higher demand than during previous recessions. This increased demand means that used car prices aren’t as likely to fall as steeply as they did during, for example, the 2008 market crash.
Not all segments of the car transport industry would fare equally well in a 2023 recession. Some sub-industries are likely to get hit harder than others in the case of a market crash.
Let’s look at which sectors are particularly vulnerable to recession influences and why that might be.
Typically, vehicle manufacturing can take a sizable hit during economic downturns.
As you might expect, with limited household budgets, many consumers are inclined to cut down on big purchases like a new vehicle. This results in auto manufacturers cutting down on their production, ultimately hurting their bottom line.
Like the above, car sales generally decline during recessions, especially new & luxury vehicle sales.
The reason for this is quite simple: Consumers earn and save less after an economic crash. Hence, they are only willing to spend some money on new or expensive personal vehicle transactions.
Due to increased manufacturing costs and higher price tags, electric vehicles are another segment of the car shipping industry that tends to be negatively impacted by recessions.
Additionally, in the event of a market downturn, electric vehicle manufacturers can run into supply chain issues for their costlier and more difficult-to-obtain lithium batteries, resulting in production delays.
While economists have a primarily favorable outlook on the economy for 2023, it doesn’t hurt to prepare for a worst-case scenario. How can you minimize the effects of a possible recession?
Firstly, vetting and verifying the reliability of any car shipping company you consider is essential. If you suspect you’re not dealing with a reputable transport provider, you don’t want to waste money on their services during a challenging economic period.
Likewise, you might want to use the services of online calculators to see if a shipping company is the best method for transporting your car or if moving it yourself could offer a more price-effective option.
Many worry about the potential ramifications of a 2023 recession on the car shipping industry. While there are some red flags, most economists do not anticipate a sudden downward over the next year.