This being the final issue in a very tough year, I wanted to end things on an optimistic note. I've written much in recent months about all the negatives facing our industry. But I am also now hearing...
This being the final issue in a very tough year, I wanted to end things on an optimistic note. I’ve written much in recent months about all the negatives facing our industry. But I am also now hearing some distinct positives I want to share with you.
David Newman of NB Financial is one of the better known transportation industry analysts in Canada and at the recent CITT conference in Niagara-on-the-Lake he pointed to several positive signs -“green shoots” as he calls them -that things are about to turn around.
Newman, who has won numerous awards for his market forecasting abilities, believes the ISM New Orders Index, which is produced by the Institute of Supply Chain Management and measures new manufacturing orders in the US, is the best indicator for freight volumes. And that index started showing first recovery and then improvement earlier this year. So why isn’t trucking seeing freight volumes rise yet? Because there is a six-to nine-month lagged correlation between the time new orders are placed in the system and the time truckers get to move the freight those orders trigger and get paid for it.
Looking specifically at the ISM New Orders Index back in September, Newman was convinced things were about to improve and two months later he remains convinced he is right about improvement by the end of this year and early in 2010.
What’s interesting is that his biggest doubters may be the very people who sincerely wish he is right: the motor carrier executives themselves. A country-wide survey that NB Financial conducted with CITT and has just released, found transportation service providers, and trucking in particular, are uncertain about the rebound in industry volumes next year.
Yet shippers responding to the same survey appear to be more confident that the industry may witness improvement in 2010. A much greater percentage of trucking executives responding to the survey believed freight volumes would either remain flat or actually decrease further next year. And less than a third of transportation providers overall answered the survey’s “exact volume projection” question, pointing to the uncertainty being felt right now.
Shippers on the other hand proved less uncertain with respect to freight volume growth and projected a slight improvement next year, with 29% projecting a 5-10% increase. And a sizeable number of shippers responded to the “exact volume projection” question, with a median projection of +8%.
Now, we know from our own research on freight volume projections (ours is due out next week) that shippers tend to be overly optimistic.
But, as Newman points out, you still have to be encouraged by the result as it is the source of volume, the shippers, who are more confident about the future.