Recent data analysis indicates that the trucking industry remains inherently strong, despite some near-term slippage, and should continue to hold the upper hand in the freight market through the summer.
"Conditions for truckers and fleets remain quite positive,” noted Jonathan Starks, director of transportation analysis for research firm FTR Transportation Intelligence, in a statement.
“The recent data on the economy has been mixed with first quarter GDP [gross domestic product] coming in substantially weaker, but sales and employment picking back up to start the second quarter,” he said.
“This recovery has been unusual in that first quarter GDP has generally been much weaker than the growth seen the rest of the year,” Starks added. “This gives us optimism that the truck markets will not be significantly slowed, although it is likely that manufacturing output will be less strong in 2015.”
Those observations dovetail with the outlook Noel Perry, senior consultant with FTR and principal of research firm Transport Fundamentals, provided last week at the 2015 ALK Transportation Technology Summit in Princeton NJ.
Perry believes the 0.2% rate of GDP growth in the first quarter should be eclipsed by year’s end, topping out at 2.3%. Though that rate of growth is “historically low,” Perry believes it will still provide trucking plenty of freight.
“This has been a strong recovery for truck freight growth,” he said. “And you should expect 3.2% truck freight growth into 2016.”
FTR’s Starks also pointed out that the firm’s Trucking Conditions Index (TCI) for March, at 7.3, reflects a continued softness due to the end of the large drops in fuel costs and a modest lessening of demand for truck services.
There are several “negatives” FTR is tracking closely that could upset trucking’s applecart this year. They include:
- As the dollar has risen over 20% in the last year, U.S. goods are now more expensive and less competitive in global markets.
- So far, the drop-off in fuel costs that started June 2014 through the present has not directly translated into large gains in consumer spending.
- If consumers save that cash, it will likely mean another year of slow and steady economic growth. And if production doesn’t match that slower consumer spending arc, then an inventory glut may develop that will have to be quickly worked down.
Yet, all that included, Starks still expects conditions affecting trucking companies to “rebound by summer” as economic growth improves, truck demand stabilizes, and capacity tightens further.
He also noted that the near-term dip in the TCI followed a very strong increase in that metric over the last half of 2014 as solid volumes, good rate gains, and falling diesel prices helped propel the TCI in December to its first double-digit reading since early 2010.
That view is echoed by Bob Costello, chief economist for the American Trucking Associations (ATA), who noted in the latest edition of the trade group’s American Trucking Trends compendium that the trucking industry generated $700.4 billion in 2014 – the first time the industry surpassed the $700 billion in total revenue mark.
“Last year, we saw freight volumes grow significantly,” Costello added in in a statement. “Increases in freight, combined with continued tight capacity helped drive revenues and coupled with lower fuel prices, we saw motor carriers go on a buying spree for new trucks as they replaced older equipment.”
Among other “big picture” data points ATA highlighted in its annual trends compilation include:
- In 2014, trucks moved 9.96 billion tons or 68.8% of all domestic freight.
- The industry’s $700.4 billion in total revenue for the year accounted for 80.3% of all freight transportation spending.
- Trucking employed more than 7 million people in 2014, including 3.4 million drivers.
- Combination trucks logged 168.4 billion miles in 2013, or an average of 69,000 miles per truck.
- Since deregulation of the industry in the 1980s, the number of registered motor carriers has grown by 68 times to more than 1.3 million carriers.
- Commercial trucks paid $16.5 billion in federal highway user fees in 2013.
Costello emphasized, however, that traffic congestion is becoming an “Achilles heel” of sorts for trucking.
“Congestion is a definite threat – you’ll see that in the data,” he noted in a videotaped statement. “[The industry] wasted over $9 billion last year in congestion-related costs.”