The trucking industry may be facing a slowdown this year, but the longer term outlook is very good, according to Bob Costello, the American Trucking Associations’ chief economist and vice president.
The industry got a jolt when ATA’s for-hire tonnage index for November fell 8.8 percent from the same period a year ago, but tonnage isn’t the whole story, Costello told participants in “Navigating the Economy and Capital Markets,” an audio conference sponsored recently by the Truckload Carriers Association’s Truckload Academy.
For one thing, many of the economic sectors that experienced downturns in 2006 – namely residential housing and automotive – tend to move heavier goods. Thus a drop in their freight can disproportionately affect tonnage overall. Also, the year-over-year comparison is somewhat skewed by the fact that carriers in November 2005 were busy hauling equipment and materials for clean-up and rebuilding after the Gulf Coast hurricanes.
In addition to tonnage, ATA tracks the number of loads hauled by for-hire carriers. Refrigerated loads through October were up 6.9 percent from the same period in 2005. Flatbed loads were about the same as a year ago, although Costello said not-yet-released data for November shows a sharp decline. Dry van loads were down 0.8 percent, bulk tank loads down 4.5 percent. The two weakest areas were longhaul loads (more than 1,000 miles), down 5.4 percent, and small carriers (less than $30 million in annual revenues), down 5.9 percent.
The capacity squeeze has eased recently because freight demand has slowed and because new emissions rules for 2007 engines prompted many carriers to step up truck buying in 2006. Some shippers are reportedly bringing carriers back to the bargaining tables and revenue per mile has declined somewhat. But Costello said the situation is likely temporary. The main reason trucking capacity has been tight is that carriers can’t find enough drivers. The shortage may have eased slightly but the fundamental problem hasn’t gone away. When freight demand starts to accelerate “capacity could quickly go back to the motor carrier side of the field,” he said.
One noticeable change that’s likely to stick is a flattening of the fall freight season. Freight demand typically jumps up in October and tumbles in November. From 1990 to 2003 the average October increase was 6.2 percent. The average November decline was 10.2 percent. But from 2004 through 2006 the October increase averaged only 1.4 percent and the November decline averaged 4.7 percent.
“Shippers are changing the way they move products,” Costello said. “We may never see the traditional fall freight season again.”
This year may be the trucking industry’s toughest since the last recession in 2001, but it won’t be as bad. The economy is expected to grow about 2.3 percent, but manufacturing will lag behind overall growth – probably growing at less than 2 percent this year and a little over 2 percent in 2008. Most economists expect things to start improving in the second half of this year. “Nothing stellar,” Costello said, “but by 2008 we should be doing much better.”
Looking long-term, the picture is much brighter. ATA studies indicate that trucking tonnage will increase 31 percent over the next 10 years. Rail is expected to grow 79 percent and air freight 72 percent, but trucking will still handle nearly 70 percent of tonnage carried by all modes.
“I think our biggest challenge isn’t the short-term downturn we’re seeing now,” he said. “It’s going to be hauling 31 percent more freight by 2017 despite congestion and the driver shortage.”
For more information on this and other TCA audio conferences, go to www.truckloadacademy.org, or call (703) 838-1950.
The industry got a jolt when ATA’s for-hire tonnage index for November fell 8.8 percent from the same period a year ago, but tonnage isn’t the whole story, Costello told participants in “Navigating the Economy and Capital Markets,” an audio conference sponsored recently by the Truckload Carriers Association’s Truckload Academy.
For one thing, many of the economic sectors that experienced downturns in 2006 – namely residential housing and automotive – tend to move heavier goods. Thus a drop in their freight can disproportionately affect tonnage overall. Also, the year-over-year comparison is somewhat skewed by the fact that carriers in November 2005 were busy hauling equipment and materials for clean-up and rebuilding after the Gulf Coast hurricanes.
In addition to tonnage, ATA tracks the number of loads hauled by for-hire carriers. Refrigerated loads through October were up 6.9 percent from the same period in 2005. Flatbed loads were about the same as a year ago, although Costello said not-yet-released data for November shows a sharp decline. Dry van loads were down 0.8 percent, bulk tank loads down 4.5 percent. The two weakest areas were longhaul loads (more than 1,000 miles), down 5.4 percent, and small carriers (less than $30 million in annual revenues), down 5.9 percent.
The capacity squeeze has eased recently because freight demand has slowed and because new emissions rules for 2007 engines prompted many carriers to step up truck buying in 2006. Some shippers are reportedly bringing carriers back to the bargaining tables and revenue per mile has declined somewhat. But Costello said the situation is likely temporary. The main reason trucking capacity has been tight is that carriers can’t find enough drivers. The shortage may have eased slightly but the fundamental problem hasn’t gone away. When freight demand starts to accelerate “capacity could quickly go back to the motor carrier side of the field,” he said.
One noticeable change that’s likely to stick is a flattening of the fall freight season. Freight demand typically jumps up in October and tumbles in November. From 1990 to 2003 the average October increase was 6.2 percent. The average November decline was 10.2 percent. But from 2004 through 2006 the October increase averaged only 1.4 percent and the November decline averaged 4.7 percent.
“Shippers are changing the way they move products,” Costello said. “We may never see the traditional fall freight season again.”
This year may be the trucking industry’s toughest since the last recession in 2001, but it won’t be as bad. The economy is expected to grow about 2.3 percent, but manufacturing will lag behind overall growth – probably growing at less than 2 percent this year and a little over 2 percent in 2008. Most economists expect things to start improving in the second half of this year. “Nothing stellar,” Costello said, “but by 2008 we should be doing much better.”
Looking long-term, the picture is much brighter. ATA studies indicate that trucking tonnage will increase 31 percent over the next 10 years. Rail is expected to grow 79 percent and air freight 72 percent, but trucking will still handle nearly 70 percent of tonnage carried by all modes.
“I think our biggest challenge isn’t the short-term downturn we’re seeing now,” he said. “It’s going to be hauling 31 percent more freight by 2017 despite congestion and the driver shortage.”
For more information on this and other TCA audio conferences, go to www.truckloadacademy.org
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