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FTR: Recovery 'Normal,' Trucking Even Better

This slow economic recovery is not as unusual as many people think, and trucking continues to outperform it, said trucking economy expert Noel Perry Thursday - and there are signs it will continue to do so, including signs we may be nearing the end of the housing slump

by Staff
December 8, 2011
FTR: Recovery 'Normal,' Trucking Even Better

Early signs of a modest housing recovery are one reason for trucking optimism, says FTR's Perry.

3 min to read


This slow economic recovery is not as unusual as many people think, and trucking continues to outperform it, said trucking economy expert Noel Perry Thursday - and there are signs it will continue to do so, including signs we may be nearing the end of the housing slump.

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In FTR's "State of Freight" webinar, Perry, who is a senior consultant to the transportation research company, as well as principal of his own firm, Transport Fundamentals, showed a slide showing that while recovery from the most recent recession is historically one of the slower ones, it tracks almost exactly with the recovery from the 2001 downturn.

"Recoveries have gotten slower over time," he said. "What this says is the behavior of the economy this time is actually pretty predictable. It also says we're not having a weak recovery, we're having a normal one. If the last recovery was good for you, this one should be the same. This is not doom and gloom at all."

Perry says the forecast for U.S. GDP is expected to grow between 2.5% and 3% next year.

Of course, he said, there are some downside risks, including a likely recession in Europe, a stagnating global economy, China's real estate bubble, and longer-term, the U.S. debt.

Another graph illustrated one way this recovery IS different from past ones: truckload growth and industrial production growth are growing more rapidly than gross domestic product.

"So even though the economy is sort of slow from a GDP standpoint, from a transportation perspective, it's not. This has been a pretty good time for transportation, and these facts show it pretty clearly."

More good news, Perry said, is that we are beginning to see signs of a modest housing recovery. Data from the Calculated Risk blog shows the inventory of existing homes is now back down to below 3 million units, which is the level it was at in 2005, "so king of in a normal range."

When there's a large surplus of existing homes, people aren't going to build new homes, with all their attendant truckloads of building materials and big-ticket consumer durable goods to put in them. This data, Perry said, suggested we may be close to consuming that surplus, and people may start building again.

In fact, partly because of that, Perry is optimistic about the outlook for flatbed carriers.

Overall, Perry said, expect moderate growth in the U.S. truckload business next year, in the 2% to 4% range.

Trucking will face a driver shortage next year, Perry said, the worst of which will likely hit in late 2012 as more government regulations on drivers start taking effect.

That, of course, will affect pricing, and Perry says there is growing evidence that truckers are getting a big bolder when it comes to rate increases. When you take into account fuel surcharges, he said, he's expecting 7% to 9% increases next year for truckload, while LTL may be up in the double digits by the end of the year.

But don't just expect rate increases to fall in your lap, Perry said, capacity crunch or no. When asked how fleets can take advantage of these rate increases, Perry said, "You take advantage of pricing opportunities by organizing to do so. You have to change your culture and put in a price increase plan," which involves training the sales force. "A lot of fleets don't do so, and end up falling behind."

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