FTR does not expect any freightdriven capacity restraints to occur in trucking over the next several years unless fomented by ldquoregulatory actionrdquo Photo by Sean KilcarrFleet Owner

FTR does not expect any freight-driven capacity restraints to occur in trucking over the next several years unless fomented by “regulatory action.” (Photo by Sean Kilcarr/Fleet Owner)

Uncertainty surrounds trucking outlook

“Keep the antacids handy” warns FTR’s COO.

The latest Trucking Conditions Index (TCI) compiled by research firm FTR reached 6.2 for April, and while that metric is up on a month-over-month basis, it still reflects “soft market conditions” for the trucking sector.

“There is enough uncertainty swirling around the trucking markets right now to force a manager or business owner to keep the antacids handy,” noted Jonathan Starks, FTR’s COO, in a statement. “Spot market rates are still negative, contracts rates are moving in that direction, and freight growth has stalled out for several segments.”

He added that trucking “is mired in a slowdown” with freight volume growth slowing alongside a “modest amount” of excessive equipment.  

FTR is currently forecasting a transition to moderate growth toward the end of the year, but sees some downside risk that freight could slow further. The firm also does not expect any freight-driven capacity restraints to occur in trucking over the next several years unless fomented by “regulatory action.”

Luckily, not all of the news is bad, stressed Starks. “The driver shortage is no longer the immediate concern it once was, and the economy continues to trudge along,” he explained. “I am watching inventory right now because of its quick impact on freight demand. Inventory levels are at highs that we haven’t seen outside of a recession since the turn of the 21st century. Does that mean we are heading into a recession? Perhaps but not definitively.”

The other conclusion, Starks said, is that higher inventory is the “new norm” and thus it will just going to take some time for supply chains to optimize their inventories. “That could slow freight growth but wouldn’t put the brakes on truck demand,” he noted.

Despite a dip in hiring last month – a dip that hit trucking particularly hard – many business executives seem to be more confident about the U.S. economy’s prospects compared to the first quarter, though they remain more guarded in outlook than they were a year ago, according to the AICPA Economic Outlook Survey, which polls chief executive officers, chief financial officers, controllers and other certified public accountants in U.S. companies, Some 37% of survey takers expressed optimism about the U.S. economy over the next 12 months, up from a three-year low of 28% last quarter. That measure stood as high as 68% in the first quarter of 2015, however.

Profit and revenue expectations also improved in the second quarter, though they remain below projected growth rates from a year ago, noted Arleen Thomas, senior vice president of management accounting and global markets for the American Institute of CPAs (AICPA).

“The good news is the slide in sentiment about the U.S. economy has reversed course and key performance indicators are pointing back up,” she said in a statement. “But there’s a long way to go to get back to the levels of optimism we saw in late 2014 and early 2015. On top of that, the presidential election and global economic uncertainty add some wild cards going forward.”

The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— rose five points in the second quarter to 68, but still remains well below a post-recession high of 78 set in the fourth quarter of 2014, Thomas noted.

The index is a composite of nine, equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment, she pointed out, and while all index categories either rose or were unchanged since the first quarter, they remain below what they were a year ago.

TAGS: News
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish