Truck News

Feature

In freight, we trust

DALLAS, Texas - There's little chance of a double-dip recession, leading trucking industry forecasters assured attendees at the first annual Commercial Vehicle Outlook Conference here recently.


DALLAS, Texas –There’s little chance of a double-dip recession, leading trucking industry forecasters assured attendees at the first annual Commercial Vehicle Outlook Conference here recently.

Eric Starks, president of FTR Associates, said while “there are substantial downside risks out there in the marketplace, a true double-dip recession is unlikely.” He said a “growth recession” is more likely, which is described as positive growth but at such a slow pace that it may feel like a recession to trucking companies.

FTR keeps a Trucking Conditions Index, which considers many variables affecting the trucking industry and combines them into one metric to measure the overall health of the trucking industry. The index, which plummeted during the recession, is now near the zero mark, which means neutral.

“We’re kind of back to normal,” Starks said. “Some guys feel great, but in general, the industry is feeling okay. The industry is going to tread water for the next several months at least and by the middle of next year, things will accelerate.”

Despite startling new housing figures that showed sales of previously-owned US homes were down 27% in July and housing starts down 12% compared to June, Starks said there’s little reason to fear a double-dip recession and pegged the likelihood of such a scenario at just 10%.

“We believe that it will take some external shot for us to go into a double-dip and it would have to be a global issue,” he said. “Something would have to happen abroad as well as domestically and it would have to be something completely unexpected to push us back into a double-dip.”

Those sentiments were echoed by Donald Broughton, managing director and senior analyst with Avondale Partners and a frequent guest on TV news and business programs. Broughton blamed those very programs for creating some unnecessary anxiety.

“People are way more worried than they should be,” he said. “(Freight) demand is going up. It’s going up across the board, in every single freight mode.”

He urged attendees not to be discouraged by mainstream media reports or stock market selloffs.

“Markets are a reflection of us; we are full of greed and full of fear. It takes a long time to instill confidence in us and it takes no time at all to instill panic,” he said of the markets. “Often, in the news media especially, they say sex sells. But panic sells and fear sells. That’s what they sell -they sell fear and it sells newspapers and it sells air time.”

The optimist went on to say that news programs place too much emphasis on consumer sentiment and other indices, which are less important than freight volumes. Referring to consumer confidence as “one of the lousiest, over-reported, useless indicators there is,” Broughton said he places his confidence in freight volumes. He rolled out chart after chart that showed positive growth in areas such as: truck tonnage; US domestic air cargo; international air cargo; intermodal volumes; and rail carloads of commodities including chemicals, metal/ore, equipment, and forest products.

“In each freight flow I see, there is no sign of a double-dip recession,” he said. As for the poor housing stats, Broughton said “trends are not built in one month.”

Broughton also said there are some fundamental differences between the most recent economic meltdown and the previous cycle.

In the last economic downturn, Broughton, who has carved out a niche as the pre-eminent source of information on US trucking bankruptcies pointed out: trucking failures removed 11% of gross capacity off the road, but the remaining players added trucks bringing the net capacity reduction to just 7%. At its worst, freight demand dropped 9%, Broughton noted.

This time around, trucking company owners seemed to have learned their lesson. This cycle: trucking failures removed 12% of gross capacity but at the same time remaining players shrunk their fleets bringing the total capacity reduction to 15% of total trucks in the market.

At its worse, freight demand shrunk 13% during the most recent recession, Broughton noted, but the road to recovery is more manageable because fleets had the wherewithal to avoid adding trucks during the downturn.

Both Starks and Broughton said fleets should be more concerned about a major impending driver shortage than freight volumes. Starks said a driver shortage of “unprecedented” proportions is going to hit in 2011, exacerbated by CSA 2010, which may effectively remove 200,000 current drivers from the pool.

“The most important factor for truckers is going to be the ability to attract, train and retain an adequate number of drivers and owner/operators,” agreed Broughton. “This will be more difficult this cycle than it has ever been.”

Broughton also left delegates with some other predictions: truckload pricing will continue to improve; nobody wants to buy EPA2010 engines but they’ll get the math to work by comprising their fleets of a mix of EPA2010 and older generation engine technology; bankers who may have swore off trucking will realize they got burnt worse by other sectors and will once again finance trucking companies sooner than you’d think; domestic manufacturing -not consumer spending -will continue to drive the economic recovery; and that the next great American consumer spending boom will come from consumers outside the US, in emerging economies such as China, driven by people who want to emulate the American lifestyle.


Print this page


Have your say:

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

*