When executives across a spectrum of businesses compared with those in trucking speak about the state of the economy you may think you are hearing about two different economies.
Although overall chief executive officers’ (CEO) confidence in the U.S. economy remained bullish in the fourth quarter, the CEO confidence index dropped 2 points to 61 over the fourth quarter, The Conference Board said (TCB).
The index is based on a survey of nearly 100 CEOs in a variety of industries. In TCB’s index, any score above 50 indicates a positive outlook.
“Expectations are that the economy will continue to grow in 2005, just not as fast as it did in the first half of 2004,” said Lynn Franco, TCB director of consumer research said. Only slightly less than half of the CEOs surveyed said that economic conditions are better than six months ago, down from nearly two-thirds last quarter.
The survey also indicates that inflationary pressures will continue to drive up costs, as CEOs on average expect to raise prices by 3.4%.
This is driven by energy prices, which in turn leave many companies, and carriers, recovering margins. “A trucking company executive might ask what would happen if they can’t get a higher per-ton fee?” Ken Goldstein, TCB spokesperson, told Fleet Owner. “What happens if they can’t pass that along to the customer and they’re eating it?”
And reacting to increasing costs is expected to be among the chief issues facing executives across all businesses going into 2005, Goldstein said. “For CEOs, it’s not the costs that are an issue as it is how much can be passed along. It’s either the pass through or lack thereof that’s allowing some executive to prosper while keeping others up at night.”
However, despite the fact the same issues are facing the trucking industry, Gary Petty, president & CEO of the National Private Truck Council (NPTC) considers 2004 going into 2005 to be a “golden year” of trucking.
“At last you can get a good dollar for your services, and if you’re a driver you have a greater command over your compensation than ever,” Petty told Fleet Owner.
However, the concerns facing trucking are not unlike those of other businesses. The top economic issues facing trucking 2005 are terrorism and productivity, Petty said. And the pass-through issue of transferring higher fuel and labor costs along to customers won’t go away either.
“The question is whether will we go through another year without a (domestic) terrorist attack,” he said. “To the trucking industry, an attack that would affect petroleum and food supplies could have a serious adverse effect on the economy in the short term, because of the obvious vulnerabilities.”
Additionally, executives are faced with the challenge of boosting productivity at a rate that matches the rising costs of drivers— a subset of the larger issue of rising costs across all business sectors.
“The biggest problem in the trucking industry is that we’re beginning to feel the productivity squeeze,” Petty said. “The cost of drivers is going up dramatically due to significant increases in health care, and because of a competitive job market. As result all the more pressure is being put on companies to get proportionate productivity out of that driver.”