It goes without saying that the trucking industry is affected by what’s happening in the general economy. Today, fleets are buying and leasing trucks and trailers at record levels. No one knows how long the good times will last, but two industry experts offered attendees at a recent NationaLease meeting some food for thought.
Steve Tam, vice president of ACT Research, listed some positive economic indicators including business/consumer confidence, rising industrial production, employment rate, stable oil prices, corporate global profits, global expansion, tax cuts and equity valuations. Some concerns he raised include: traffic and trade tensions, rising inflation and interest rates coupled with stagnating wages.
Tam is upbeat about the near-term condition for trucking but added that he expects the rate of freight growth to slow in 2019 to low single digits. He explained that the factors that drive truckload freight are going to move “from great to good” and that private fleets are expanding to reduce their spot market exposure. This will remove freight from the for-hire segment in the coming quarters.
He also spoke a little about the medium-duty side of the market, saying in the 2018-19 timeframe, that market would be reaching a plateau at high, stable levels.
Next Tam turned to electric vehicles describing the market as “revolutionary change at an evolutionary pace.” He explained that without incentives, the payback period for electric vehicles is long and that there is a significant upfront premium cost for them. However, he pointed out that California has launched a robust first round of incentives to encourage the purchase of electric vehicles.
Also speaking at the event was Noel Perry, transportation economist and founder of Transport Futures, who said that things will be good for six-to-12 months, but reminded the audience that, “good times now do not mean good times beyond a year from now.” He added: “Only an unprecedented change in U.S. economic patterns will keep the economy strong through the three-year planning horizon. A storm is more likely in 2020.”
He believes, “The industry is about to make the difficult transition from euphoric good times to painful normality or worse.”
While carrier and shipper margins are approaching cyclical highs, Perry said both are likely to fall as industry and economic conditions soften.
No one can predict the future, but keeping your eye on conditions in the general economy and the trucking industry can help you spot changes more quickly. Regardless of economic conditions, operating your business in an efficient, lean manner will help you weather any storm.