Despite a two-month surge in trucking tonnage at the end of 2009, freight volumes are still predicted to be modest at best for most of 2010-- largely because consumer spending and business investment are predicted to remain sluggish through this year.
“The robust tonnage numbers in November and December [last year] were aided by better economic growth as well as a positive inventory effect,” said Bob Costello, chief economist for the American Trucking Associations (ATA).
“However, economic activity is expected to moderate in the current quarter, which will keep a lid on tonnage growth,” he stressed. “There is no doubt that the industry is moving in the right direction, but the level of freight will not be as strong as the year-over-year increases suggest because of how terrible it was in late 2008 and much of 2009.”
ATA’s advance seasonally adjusted for-hire truck tonnage index climbed 2.1% in December, following a 2.6% hike, but Costello pointed out that trend line can be deceiving. For example, seasonally adjustment tonnage increased 6.6% in December 2009 compared with December 2008 – the first year-over-year increase since September 2008. However, for all of 2009, the tonnage index was down 8.3%-- the largest annual decrease since a 12.3% plunge in 1982.
“The problem is that half the U.S. GDP [gross domestic product] growth we saw fueling this tonnage increase came from a change in inventory – in other words, most of the tonnage resulted from a one-time inventory effect,” Costello told FleetOwner. “We’ll take any increase, of course, and we’re headed in the right direction. Just don’t expect this pace to continue into the first quarter this year or for much of 2010 for that matter.”
Eric Starks, president of research firm FTR Associates, concurred with Costello’s analysis. “In general, we’re still looking at things moving in the right direction – we’re seeing modest increases in the first quarter from the industrial sector. Bbut the real question is if the consumer will get back on board and retailers begin restocking their shelves,” Starks told FleetOwner. “We still have to wait and see how that plays out.”
So far, though, it’s not playing out well. According to the most recent Reuters/University of Michigan Survey of Consumers posted Jan. 15, U.S. consumer sentiment has changed little as worries over income and high unemployment offset news of an improving economy. The preliminary index of sentiment for January was 72.8, up from 72.5 late December and 61.2 a year ago.
“While consumers anticipated continuing gains in the overall economy, few consumers expected an immediate shift toward the type of positive developments that would improve their job and income prospects,” noted Richard Curtin, director of the surveys.
Still, there is good news. ATA’s Costello pointed out that bloated inventory levels are no longer a drag on trucking. “The issue is that we’re still seeing below-trend growth in consumer spending and business investment,” he noted. “So while we may get some strong [tonnage] months, that won’t be the norm. In terms of overall trends, [tonnage] won’t be as strong.”