INDIANAPOLIS, Ind. – The fundamentals driving 2019 freight demand remain “relatively healthy” and should result in a growing, but not explosive, transport sector.
That was the assessment of Avery Vise, vice-president of trucking for FTR, who addressed the topic during a recent State of Freight Webinar focusing on 2019 freight demand drivers.
“We will really just be moving back towards what most people would describe as a normal market,” Vise said. The webinar examined the 2019 outlook for manufacturing, trade, construction, energy, and employment. Most attendees expressed in a poll that they feel trade and tariffs will have the biggest impact on the 2019 freight market.
Vise noted that truck loadings have flattened since late in the second quarter of 2018, which could take pressure off the market and signal more volatility in 2019.
Eric Starks, CEO of FTR, agreed that “key freight drivers remain fundamentally strong. We will certainly see slower growth year-over-year, but we don’t anticipate any significant pullback from 2018 levels.”
Starks noted truck orders had a strong year in 2018, but November and December order activity dropped back to “what we would call a more rational level.”
But Vise said this is not necessarily a reflection of poor sentiment among truck buyers, but more likely because truck OEMs have full orderboards and long lead times, which is discouraging new orders.
“I’m not reading too much into the slowdown, because orderboards are filled so far out,” Starks agreed. “Orders won’t tell us a whole lot over the next several months.”
The ISM manufacturing index remains in expansion territory, but Vise noted it has declined sharply in December. Core capital goods orders are slowing, which could speak to declining business investment, but Starks countered they are still near an all-time high.
The inventory-to-sales ratio has ticked up, but Vise noted it could be due to new trends such as a surge in e-commerce or a rush to import products before threatened tariffs kick in. Starks pointed out many goods are being stockpiled on the west coast and are not yet making their way to final destinations inland.
Household construction remains a weak spot for the U.S. economy and trucking sector.
“We’re seeing a market that’s okay. It’s not bad,” said Vise. “It’s occurring at about the slowest rate you can imagine since the end of the recession, and not growing strongly.”
Starks said this could be because the U.S. is still working through its supply of existing homes.
Employment levels remain at all-time highs, and in 2018 there were more job openings than unemployed people for the first time since such stats began being tracked 18 years ago. This could keep trucking capacity limited in 2019, Vise noted.
Low energy prices are good for consumer spending and for diesel prices, but they also indicate a decline in industrial activity, Starks explained.
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