Recovery is here, but volatile

Recovery is here, but volatile

The economic recovery is well underway, but fleets can expect to face “high volatility” in freight tonnage during the upturn, according to industry analysts FTR Assocs. While the short-term news is positive, the group is “pretty pessimistic about the [overall economic] growth trend over next 10 years,” according to senior consultant Noel Perry

The economic recovery is well underway, but fleets can expect to face “high volatility” in freight tonnage during the upturn, according to industry analysts FTR Assocs. While the short-term news is positive, the group is “pretty pessimistic about the [overall economic] growth trend over next 10 years,” according to senior consultant Noel Perry.

Tonnage growth for truckload carriers should hover just below 5% for the first three quarters of the year, hitting 5% in the fourth quarter, he said during FTR’s “State of Freight” webinar yesterday. While freight levels have been hurt by severe weather throughout most of the country over the last six week, “when the weather issues subside, that could bring a wild swing in demand, and we could see a real [truck capacity] shortage” by early Spring, he predicted. “The real message today is high volatility.”

Overall economic growth combined with industry-specific regulations like CSA and new hours-of-service rules should create a capacity shortage of about 200,000 trucks this year, according to his forecast. That shortage will grow to 260,000 units in 2012, and shrink a bit to 150,000 units in 2013 as fleets respond by adding equipment and drivers, Perry said.

Despite the freight growth already experienced in 2010, rates didn’t match tonnage improvements last year as fleets managed to get more productivity out of existing equipment. The result was a near 100% improvement in truckload carrier operating ratios, according to Perry.

“They made more money without raising rates too much,” Perry said. “But now with most of the excess capacity taken out, they will have to buy more trucks and hire more drivers if they want to handle more freight.”

Although freight rates have risen more slowly than in past recoveries, they should sustain higher levels for a longer time as “the freight environment will be dominated by capacity shortages and pricing will be strong” through 2013, he said.

Along with strong rates, though, Perry predicted that driver pay will increase “by double digits by the second quarter [of this year] and maintain double digit growth for at least another year.”

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