Truck News


Light at the end of the tunnel or just a mirage?

Hopes that there is finally light at the end of the tunnel based on recent reports of US truck tonnage showing a spike in January (it was our top Headline News story on Friday) are, unfortunately, wishful thinking.
US truck tonnage did spike 3% in January but that’s only because December’s numbers were so dismal. Put the spike in perspective and you see why there’s no reason to be optimistic: compared to the previous January, the month was down 10.8%; and the month’s tonnage was the second lowest since October 2002.
As the American Trucking Association’s chief economist Bob Costello pointed out, just because the tonnage figures show the occasional spike is no indication the US economy is on the mend. The reality is that tonnage is still showing significant drops on a year-to-year basis.
We are far, far from a recovery, particularly one led by the resurgence of the US economy.
That’s certainly what FTR Associates, well known for their transportation sector outlooks, believes. It sees economic activity declining sharply in the US with the first quarter economic activity forecast to decline another 4.8% after falling 3.8% in the final quarter of 2008. Loadings are forecast to drop another 10% over the next several months and be off by more than 7% in 2009. That represents more than a doubling of the dropoff forecasted just a couple of months ago.
FTR expects the US economy to continue contracting right through to the third quarter of 2009. To make matters worse, there is also concern about a protracted “down cycle” in which the US economy remains stuck in neutral into 2010.
Canadian exporters are also not looking at the US market through rose colored glasses. Sentiment among Canadian exporters has hit a record low. They now see the United States as among the riskiest markets in which to sell goods, according to a semi-annual confidence survey conducted by Export Development Canada.
At the same time, concerns about the domestic economy hit a new high, with 57% of respondents expecting domestic conditions to worsen, a 15% leap in just six months.
Despite all the bankruptcies of the past year, FTR points out that the amount of excess capacity in the market remains troubling. Its latest forecast has capacity utilization staying below 70% through the third quarter of 2009.
There is already a great deal of pressure on rates but motor carriers with 30% of their equipment lying idle will likely be pressured into more rate cuts and perhaps even more questionable business decisions.

Lou Smyrlis

Lou Smyrlis

With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.
All posts by

Print this page

1 Comment » for Light at the end of the tunnel or just a mirage?
  1. daniel boyer says:

    Lowering rates only makes it worst, our expenses dont go down, but the carriers keep cutting rates. I was undercut by as much as 30 percent on some locations we do on regular basis, thus loosing those customers because i refuse to work under my cost price. What will happen if the economy stays like this until last quarter of 2009??? A lot of carriers that have lowered their rates too much will go down in flames. In such hard times, we have to rethink the way we do business and dig into our customer base to elaborate a renewed way of partnership with them. Be inventive and proactive.
    Daniel Boyer, CITT

Have your say:

Your email address will not be published. Required fields are marked *