There are certainly good trend lines developing for trucking right now – orders are strengthening nicely for trucks and trailers, for starters – but others aren’t quite so positive, especially where freight rates are concerned.
For example, ACT Research noted its for-hire trucking index indicated slowing freight volume growth in February compared to January’s reading, falling 57.1 points – even though that reading is over four points higher than the rolling twelve-month average, noted Kenny Vieth, ACT’s president and senior analyst.
Modest improvements in pricing continued into the second month of the year, he said, with the index virtually unchanged from January. “February marked the fifth consecutive month of positive price index readings [but] fleet productivity grew at a slower rate, at 52.9, following the significant bounce at the beginning of the year,” Vieth added.
One fleet he talked to noted that, while there is an “upward trend” in load demand, it’s “still nothing great, but much better than fourth quarter of 2016.”
Broader economic trends seem to back that up. Late last month, Lindsey Piegza, chief economist for Stifel Fixed Income, noted that “business investment remains tepid at best,” though back-to-back months of improvement following 23 consecutive months of zero or negative growth “is a vast and encouraging improvement” in her words.
At this point, though a good portion of business investment gains is being buoyed by “confidence” in better conditions ahead resulting from a pro-growth agenda that’s still being developed by the Trump administration.
Yet put another way, that’s merely “hope” for better days; and politics can be a very nasty rocky shoal where such “hopes” go to crash and drown upon.
“Political promises need to turn into reality in order to sustain and further propel this type of activity,” Piegza stressed. “So we remain cautiously optimistic as there are limitations to what the President can do. But even minimal improvement from an otherwise declining trend established over the past near-decade is a large step in the right direction.”
On the front lines of trucking, though, the picture isn’t as clear that things are moving in the “right direction” just yet.
John Larkin, managing director and head of transportation capital markets research at Stifel, noted in a recent note filed from the road that pricing still remains challenging in the U.S. truckload market, with most customers and shippers “not in the mood to accept price increases off generally depressed 2016 levels.”
Overall, Larkin considers the “pricing picture” where truck freight rates are concerned “not terribly encouraging, near-term” as freight volumes so far this March are meeting “seasonal expectations” after a weak February.
“No one is characterizing freight as strong,” he stressed, with the “possible exception” of some flatbed, open-deck, specialized, heavy-haul, and open-side carriers.
Still, Larkin pointed out that that volumes hauled by flatbed and “specialized” motor carriers often begins to strengthen in advance broader freight growth in the dry van truckload sector.
“Simply put, strengthening in the flatbed space can be an encouraging early indicator,” he said. “[But] dedicated opportunities are less pervasive than they have been in recent years as loose supply and demand has reduced the shipper’s sense of urgency to outsource their private fleet operations or to consider conversion of some irregular route truckload lanes to dedicated lanes.”
Thus it seems we’re stuck in a waiting game, of sorts; waiting to see if President Trump’s ambitious plans will get enough Congressional support to pass and whether that in turn fuels a full-throated economic rebound in the U.S. The nation’s economy is on the taxiway, engines thrumming; will we take off?