As sales volumes increase, forcing retailers and wholesalers to replenish inventories, linehaul freight volumes will see an accelerated growth rate through the first half of this year. That will not be sustained, however, as inventories (Chart A) are expected to be replenished by the end of the second quarter. As a result, Commercial Motor Vehicle Consulting is forecasting a moderate deceleration of freight volumes to align with the growth rates of consumer and business spending.
Increasing employment (Chart B) will support a moderate rise in the growth rates of consumer spending. The economy began to grow in the third quarter of 2009, and businesses have reached the point where they must increase payroll to satisfy sales.
Despite a growth in personal income due to employment gains, households will continue to direct a portion of their incomes to increasing savings and lowering debt. This means the imbalances — low savings, high debt and a steep decrease in wealth — experienced in the recession remain a factor in constraining consumer spending.
The expansion of personal income as stimulated by employment, though, implies recovery in freight volumes will become broad-based across sectors — manufacturers, wholesalers and retailers — and across commodities such as apparel, autos and furniture. That freight growth will not be uniform across commodities, though, since consumers will be slow to replace expensive durable goods, such as furniture, due to high debt levels. Freight volumes of less expensive items with short lifecycles, such as clothing, will expand at faster growth rates.
For-hire trucking is not unlike other industries, as expanding sales (Chart C) will put pressure on carriers to increase employment to meet higher freight volumes. There has not been a large emphasis on driver recruitment for the past few years, but now is the time for carriers to design strategies to do just that before their businesses demand large increases in drivers to meet shippers' freight requirements.
In conclusion, economic conditions within the supply chain imply the freight recovery is firmly in place and the expansion in freight volumes will become broad-based as employment gains stimulate higher consumer spending. The business environment for carriers is transitioning from the rationalization of fleet capacity in a declining market to expanding capacity to meet higher freight volumes. Now is the time for carriers to get a head start in developing plans to cost-effectively manage expected increases in fleet capacity. To quote Bob Dylan, “There's a slow, slow train comin' up around the bend.” Carriers that plan ahead will be able to cost-effectively manage the environment when the train arrives at their station. Enjoy the ride; the freight recovery is finally on the rails and coming to a station near you.
Commercial Motor Vehicle Consulting publishes the monthly newsletter Visibility of the Supply Chain for general freight carriers. To order a copy, contact Chris Brady of CMVC at [email protected] or 516-869-5954.