Truck industry capacity is expected to remain tight through 2006 and 2007, according to transportation research firm FTR Associates (www.ftrassociates.net). The continued strength in manufacturing and freight-producing sectors of the economy has led to strong truck use, but Eric Starks, president of FTR, said that the ongoing slowdown of manufacturing growth and housing remain a concern that could hurt freight volumes beyond 2007.
FTR predicts that in 2006 freight volumes across all transportation modes will increase 2.1%, with trucks handling 44.8% of that in 2006 and increasing to 45.3% in 2007.
“In this environment, freight carriers have been able to aggressively raise rates,” Starks said. “While this is good for the trucking industry, it is countered in large measure by the escalating costs to operate. In addition to rising fuel, interest and equipment costs, driver wages will continue to rise as a substantial shortage persists.”
Currently the trucking industry is short 87,000 drivers, according to FTR.
Right now the industry that will have the biggest impact on trucking is the manufacturing sector, Starks told FleetOwner. Currently that sector is showing signs of decelerating growth. However, the industry will confront the added pressure of increases in the Federal Reserve funds, which is now at the 5% level and is expected to be 5.25% by the end of June. Although the manufacturing sector is not directly affected by interest rates, consumer spending—which accounts for 70% of the total U.S. economy and thus drives manufacturing activity—is.
A double whammy of high interest rates and energy cost-driven inflation has the potential to crimp both consumer spending growth and manufacturing.
“The Fed will tighten to overcome inflation and that will slow down the manufacturing sector,” Starks said. “[High interest rates] make consumers rethink purchases. For example, we’re seeing mortgage rates creep higher and that will have a filtering effect that eats its way through the overall economy.”
But for the full year Starks predicts trucking rates will increase an additional 4 to 5%. “If we ever see a halt in trucking rate increases, it would happen at the end of this year or next year. Trucking companies will continue to push rate increases in the second and third quarter. Beyond that it will depend on how the economy is behaving.”
Additional details about truck capacity utilization, the labor situation and other trends affecting the transportation industry are available through a new publication jointly offered by FTR Associates and Informa Economics, Inc.
For a sample issue of the Transportation, Logistics and Fuel Report and the Weekly Fuel Monitor Service, go to www.informaecon.com/transportation.htm or contact Doug Starks, customer relations director at 888-988-1699, ext. 45.