Uncertain market puzzles trucking

With slumping truck sales and uncertain freight volumes alongside an U.S. economy that’s still seeing average gross domestic product (GDP) growth of 2% per quarter-- with more such moderate increases to come-- it’s no wonder trucking carriers and suppliers are having a hard time charting a business course to follow in the coming months

With slumping truck sales and uncertain freight volumes alongside an U.S. economy that’s still seeing average gross domestic product (GDP) growth of 2% per quarter-- with more such moderate increases to come-- it’s no wonder trucking carriers and suppliers are having a hard time charting a business course to follow in the coming months.

“I must admit I am totally confused by what I am seeing,” Doug Clarke, president & CEO of both AmeriQuest and NationaLease, told FleetOwner. “It’s hard to determine where we are going economically. Are we seeing an economic slowdown developing or is a lot of what’s going on the fallout from the big pre-buy of trucks in 2006? This is creating a lot of apprehension and it makes it hard to plan,” he said.

U.S. Class 8 truck sales in April dropped 45% to 13,373 units compared with the same month last year, according to WardsAuto.com. New orders took a bigger hit, topping off at 10,491 units in April, which was down 65% compared to April 2006, according to A.C.T. Research.

Meanwhile, freight volumes have been erratic since a 6.2% gain in December, according to data compiled by the American Trucking Associations (ATA). Volumes dropped 3.6% in January, rose 1.6% in February and another 1.2% in March, before falling in April by 2.2%.

“April’s tonnage figures highlight that the economy hasn’t turned the corner just yet,” said Bob Costello, ATA’s chief economist. “We can expect this volatility to continue over the next few months, with the potential for more year-over-year contractions.”

Costello added that he anticipates the industry will see a gradual improvement in volumes as the year progresses due to an inventory correction and a better economic outlook for 2008. “These should combine to boost truck [freight] volumes,” he said.

AmeriQuest’s Clark added that his barometers of trucking industry health – truck rental rates and used truck sales – are also improving, though it’s taking a while to recover from big drops suffered at the start of 2007.

“Rentals were way off in the first quarter this year and we had a big oversupply of used trucks,” Clark told FleetOwner. “But we saw a firming of the rental truck business in April – that’s good news. And while there’s still some oversupply of used trucks, it’s not as bad as it was at the beginning of the year, though I think we’re still months away from a good uptick in the used truck business.”

Federal Reserve Chairman Ben Bernanke also sees more good than bad in the days ahead for the economy. Speaking at the 2007 International Monetary Conference in Cape Town, South Africa, via satellite this week, Bernanke said that, over the past four quarters, U.S. GDP has increased at an average rate of about 2% percent. Though growth during the first quarter of this year was held down by some factors – notably, significant declines in inventory accumulation, net exports, and federal defense spending – those seem likely to be at least partially reversed in the near term, he stressed.

“Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected,” Bernanke cautioned. “Thus far, however, we have not seen major spillovers from housing onto other sectors of the economy. On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion.”

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