WHAT CAN YOU EXPECT IN 2014? SLOWER FREIGHT GROWTH, MAXED OUT CAPACITY
February 18, 2014
Industry forecaster FTR held one of its always-informative State of Freight Webinars last week, in which senior consultant Noel Perry predicted the year ahead. He said he expects the US economy to strengthen in 2014, but freight growth will...
Industry forecaster FTR held one of its always-informative State of Freight Webinars last week, in which senior consultant Noel Perry predicted the year ahead. He said he expects the US economy to strengthen in 2014, but freight growth will slow. Remember, while no one felt like they were getting rich in 2013, it was actually a very good year for freight in the US. In fact, it was the best in 15 years, according to the ATA’s For-Hire Truck Tonnage Index.
Capacity utilization, according to FTR now sits at about 98%, and it’s expected to reach 99% by the end of the year. So, why isn’t this translating into higher rates? Noel indicated trucking rates actually softened slightly in 2013. The last time capacity utilization hit 99% in the US was in 2004, and at that time truck pricing surged by double digits.
Noel explained that the climb to 99% capacity utilization happened much more quickly a decade ago, giving industry and shippers less time to adapt. This year, while 99% may be reached once again, it has been a slow climb from about 96%, so there hasn’t been a sudden spike in demand that would result in sharp price increases.
That said, Noel also pointed out the conditions are in place for a capacity crisis, the likes of which hasn’t been seen before. While the ‘economic drag’ on capacity is manageable, there’s also a ‘regulatory drag’ that didn’t exist in 2004. By this, he’s talking about some 27 regulations FMCSA has in the works that can further reduce the industry’s capacity, much like the HoS changes implemented last July did. He figures that change alone resulted in the need for 150,000 more drivers. If these regs come to pass on schedule, Noel said “It will throw this capacity issue into entirely new ground.”
But he’s not holding his breath. The FMCSA tends not to meet its self-imposed deadlines when it comes to implementing new regulations. But even so, that doesn’t mean a capacity crisis won’t materialize, it may just take place further out than 2014. Noel’s best advice for carriers? “Stay flexible,” he said, noting it’s still possible a capacity crisis equal to or greater than that seen in 2004 could develop. You can find a more detailed report here.
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