The latest freight data from the Freight Transportation Services Index (TSI) and the American Trucking Assns. (ATA) both show slight growth, giving hope to those who feel trucking will soon begin somewhat of a rebound.
According to Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC), the consensus is that domestic freight is up slightly, and while it should continue to grow, the pace will be very incremental.
“In general, it’s probably up 2% or less,” Brady told FleetOwner. “It will continue to grow, but it will be very sluggish, in the 1 to 2% range, until at least the end of the year and probably through 2009 as well.”
Longbow Research transportation analyst Lee Klaskow upgraded the trucking sector from ‘underweight” to “neutral” after finding that 44% of North American truckload carriers expected business for the rest of the year to be positive vs. just 15% during June.
“We believe we will continue to see capacity depart, creating a better pricing environment,” Klaskow said. “Sixty-one percent of our respondents indicated they were either seeing base rates increase or getting better fuel surcharge recovery. We believe shippers will be aligning themselves with large trucking companies to ensure capacity when the North American economy begins to reaccelerate, which we view as a 2009 event at best.”
In addition, a new report by the Intermodal Association of North America (IANA) said that total domestic volume achieved its highest growth rate in the second quarter of 2008 since the second quarter of 2004, as intermodal trailer volume increased 1%, the first growth in over three years.
However, the IANA report predicted further weakness in both intermodal and trucking markets, stating that concerns about bank failures, inflation and job losses will continue to keep the U.S. economy weak, and therefore stunt the truck freight market, mainly evidenced by low retail sales.
“The recent theme in trucking markets seems to be performance beating very low expectations, at least for the big publicly traded carriers,” the report said. “This seems to be more of a capacity story than a demand story. With diesel skyrocketing and bankruptcies high, capacity is exiting the market. At the same time, the high dollar is boosting exports of used tractors, helping ensure that capacity leaves the North American market rather than just being churned to another player.
“Truckers will be burdened for the balance of 2008 by the same uncertainty plaguing intermodal markets,” the report continued. “In fact, their challenges appear even larger given the outsized impact of fuel on trucking costs. With costs high and demand weak, trucking executives will struggle to find their way to recovery; for an increasing number, intermodal will become an attractive alternative.”
However, according to Brady, while the economy still has some large imbalances to work out, consumer spending is slowly growing, and he does not see intermodal as a viable alternative for most shippers.
“Intermodal is 5% or less of total freight,” he said. “There has been a shift to intermodal by some shippers due to fuel prices, but that is only going to affect goods shipped 800 to 1000 miles or more. It’s much more difficult to switch to intermodal for distances of 300 or 400 miles.”