INDIANAPOLIS. The economic and regulatory pressures faced by the trucking industry now and in the near future will continue to generate a large amount of uncertainty well into next year, according to a general overview of the themes FTR & Associates plans to address this week here at its annual transportation conference.
“When is the last time in history we’ve seen the U.S. economy grow at an average of 2% for several years straight?” Jonathan Starks, FTR’s director of analysis, told Fleet Owner.
“Put another way: if the economy grows at 4% or more, you can clearly see what’s driving it. If the economy contracts by 3% or more, you can see what’s driving it,” Starks added. “But when growth hovers around 2% that means there’s a mix of both positive and negative factors at work, and so it’s still hard to see any sustainable movement upwards developing.”
One example of such economic uncertainty can be gleaned from recent housing industry figures analyzed by Lindsey Piegza, chief economist at research firm Sterne Agee.
Piegza noted that housing starts increased just 0.9% in August, from 883,000 to an 891,000 unit pace, falling short of an expected 2.3% increase. And while single family starts inched up 0.9% in August after a 5.7% increase in July, multi-family starts, by contrast, fell 11.1% in August after a near 30% increase in July.
On top of that, building permits declined 3.8% from 954,000 to a 918,000 unit pace in August, nearly reversing the 3.9% increase in July, Piegza said, adding that on a three month average, permits have slowed for the second consecutive month to 930,000.
"Bottom line: less than stellar housing market reports, both falling short of expectations,” Piegza pointed out. “The most apparent weakness is in the multi-unit sector, but momentum in the single family market too has been losing momentum as builders remain cautious in a rising rate environment. Increasing financing costs are expected to curtail demand for new construction and limit activity in the second half of the year.”
Yet at the same time, for-hire truck tonnage figures compiled and tracked by the American Trucking Associations (ATA) increased significantly in August, with the trade group’s tonnage index jumping 1.4% in August after falling a revised 0.6% in July – the largest single-month tonnage gain since May.
“The strength in tonnage continued again in August, with the index increasing in three of the last four months,” noted Bob Costello, ATA’s chief economist, in a statement. “The improvement corresponds with a solid gain in manufacturing output during August reported by the Federal Reserve last week.”
Further good tidings for freight can be gleaned from the recent holiday sales projections released by Deloitte LLC’s Retail & Distribution practice this week; predictions that call for holiday sales between November and January 2014 to climb to between $963billion and $967 billion, representing a 4% to 4.5% increase in November 2012 through January2013 holiday sales (excluding motor vehicles and gasoline).
That growth rate is on par with last year’s 4.5% gain, noted Daniel Bachman, Deloitte’s senior U.S. economist.
“Rising home prices with steady job creation may buoy consumers’ confidence in the economy and create a wealth effect,” he added. “The debt ceiling and budget debate will resume this fall alongside uncertainty about the implementation of health care reform, which may cause some concern among consumers, but at a macro level, these factors are unlikely to have a significant effect on the economy and retail sales.”
Still, even ATA’s Costello remains wary about how the underlying tonnage trends for the rest of 2013 are shaping up, as he said while TL loads have accelerated the last few months, they are flat for the year, while LTL shipments are up less than 1.5% this year.
“Tonnage’s strength in recent months, and really through 2013, is probably overstating the robustness of the economy and trucking generally,” he stressed.
FTR’s Starks sounded a similar note of caution as well, noting in particular that the full impact of several major regulatory initiatives – especially hours of service (HOS) revisions – hasn’t hit the trucking industry yet.
“That’s where the real question for trucking is heading into 2014: how will regulatory implementation affect capacity?” he said.
“The industry remains on the cusp of a very tight capacity market yet one that is growing in some places as well. However, that ‘growth’ cannot fully take off yet as carriers wait to see how the full implementation of regulations affects them,” Starks emphasized. “Will that finally force carriers to add more equipment and boost rates? That I think will be where our conference this week will provide the most insight.”