BOSTON, Mass. – Despite some massive blows to the U.S. marketplace, including rising inflation, destructive hurricanes and fuel prices reaching dizzying new heights, the economy seems to have walked away with only a few cuts and bruises. But while it’s not laid up in intensive care, it doesn’t mean the States are out of the woods yet, according to Bob Costello, chief economist of the American Trucking Associations (ATA). Costello served as a panelist at the ATA’s Management Conference and Exhibition in October and also printed economic results in the ATA’s Trucking Economic Review.

In terms of trucking activity, Costello said volumes have decelerated recently, though they continue to grow on a yearly basis. The ATA’s Monthly For-Hire Truck Tonnage Index has risen 2.1 per cent year-to-date compared to the same time last year.

Even though the growth rate was 5.7 per cent in 2004, Costello said 2.1 per cent is good.

However, the overall economy is growing faster than the ATA’s index, with GDP increasing 3.8 per cent in the third quarter of 2005 and retail sales up 8.3 per cent compared with the same quarter last year.

Despite the fact the trucking industry seems to be trailing the national growth rate, Costello gave four reasons why it’s not necessarily cause for alarm.

“For one, it is difficult to increase tonnage rates when capacity growth is relatively small. Most large carriers are not adding much capacity this year, which is keeping a lid on tonnage growth,” he said. “At the same time, some non-asset based transportation providers are also picking up some additional freight. These companies have a network of thousands of small carriers and probably have been absorbing a portion of the new growth. The third reason why the for-hire tonnage index is not growing as fast as the overall economy is due to private carriage. For-hire tonnage, including TL and LTL, is roughly 52 per cent of total truck tonnage. Private carriage accounts for the remaining 48 per cent. Since for-hire capacity remains tight, many private carriers have added marginal capacity this year thus picking up some of the excess. Also, private carriers, which typically have a much shorter average length-of-haul, find it easier to attract and retain drivers, helping them increase capacity more than truckload carriers.”

Costello said the last reason truck volumes don’t seem to be keeping up is simply because of the differences in what’s being measured.

The Federal Reserve, the central bank of the U.S. which determines the nation’s monetary policy, reported that manufacturing output was up 3.1 per cent in the third quarter though the ATA’s index only reported 0.6 per cent for truck tonnage.

Costello said this figure is misleading as the feds weigh products based on value instead of truck tonnage.

After re-evaluating the feds’ measurements with tonnage in mind, Costello said the actual growth for manufacturing was only 0.3 per cent, half of the gain on the ATA’s index.

Volume growth rates vary greatly across the board this year, according to Costello’s report. LTL tonnage is up the most with nine per cent growth, with flatbed up 6.3 per cent, bulk/tank up 5.4 per cent and reefers up 3.7 per cent.

“Although industry volumes overall are increasing only marginally on a year-over-year basis, the good news is that industry revenues are increasing robustly,” Costello said.

“Year-to-date, truckload revenues were up 11.1 per cent compared with the same period last year. LTL revenues, meanwhile, jumped more than 17 per cent. Certainly fuel surcharges probably inflated these numbers some, but even excluding these extras, revenues remain solid because capacity is still tight.”

Though volume is up a modest amount and revenue is banking considerable gain, there’s still the cost side of the business, including driver wages. Costello is forecasting driver wage increases in the years to come, as trucking continues to fight its way back to the top after the post-9/11 construction industry boom.

“Due to industry growth and a very tight supply of drivers, many TL carriers instituted pay increases during the first quarter of the year,” he said.

“This fall, we are hearing reports of many carriers implementing a second round of pay increases, especially in those areas where driver availability is severely limited, like the long-haul market. Minus a recession, which we are not forecasting, driver wages are expected to continue increasing.”

Though the forecast for the driver wage increases seems to have a bright future, the picture for diesel fuel is mostly doom and gloom.

Fuel represents about 25 per cent of total operating expenses, and with diesel prices reaching new heights in the wake of hurricanes Katrina and Rita, the economy was dealt a crippling blow. With the U.S. still struggling to recover, the ATA has estimated the industry will spend $85 billion on diesel fuel this year, up $23 billion from last year. The forecast for 2006 is sitting at an astonishing $90 billion.

“As of late October, 18 per cent of total U.S. refining capacity and 68 per cent of total U.S. crude production in the Gulf of Mexico remained off-line due to the recent hurricanes,” Costello said.

Though diesel prices remain high, gasoline continues to drop in part because of supply.

“Diesel is used extensively in Europe and Asia for most transportation vehicles, including passenger cars. Those continents can export excess gasoline to the United States.

“However, Europe and Asia do not have much of an extra supply of diesel to sell to the U.S. market, and as a result, the price of diesel remains elevated,” Costello said.

There is hope of some relief as a few forecasters expect crude oil to fall to $50 per barrel by the end of 2006.