Truck Tonnage Sees “Banner Year,” But Will Sun Soon Set On Trucking Good Times?

For-hire truck tonnage grew 6.6% in 2018, which is the highest rate of annualized growth since 1998; so why are some economists predicting a slowdown in the U.S. economy?

Little Rock, Arkansas – A prominent trucking executive recently told Transportation Nation Network, “if trucking companies can’t make money in this business environment, then they can’t make money.”

In fact, newly released data from the American Trucking Association (ATA) helps to paint a clearer picture about just how good the trucking business environment was last year. According to ATA’s  advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index, tonnage increased 6.6% in all of 2018 representing the largest annual gain since 1998 (10.1%) and significantly better than the 3.8% increase in 2017.

“The good news is that 2018 was a banner year for truck tonnage, witnessing the largest annual increase we’ve seen in two decades,” ATA’s Chief Economist Bob Costello commented. With the good news came a bit of concerning news for trucking industry stakeholders as freight growth slid substantially in Q4.

“There is evidence that the industry and economy is moderating as tonnage fell a combined total of 5.6% in October and November after hitting an all-time high in October,” Costello commented.

Despite slowing freight growth, economic confidence got another boost when the U.S. Labor Department (DOL) released its economic numbers from December. More than 312,000 jobs were added in December shattering expectations. Workers saw their wages grow by 3.2% which was up .5% from December of 2017. The labor participation rate climbed to 63.1%.

The for-hire trucking industry was also a big winner adding jobs for the 8th straight month. Trucking added 2,900 jobs and total employment in the for-hire trucking industry was 1.4969 million in December, according to the DOL. That’s up 36,600 jobs from December of 2017.

The unemployment rate did rise slightly to 3.9%. However, that’s because the strong economy pulled job seekers back into the market who had previously given up on landing employment.

Investors may have to wait for new economic data from the U.S. DOL as the partial government shutdown could impact its release in the coming weeks.

Creeping Economic Pessimism In Trucking Market

Joining in Costello’s predictions of an economic slowdown have been other industry analysts from respected freight forecaster FTR and commercial vehicle sales data experts ACT Research.

Kenny Vieth, ACT’s President and Senior Analyst, recently commented, “Over the course of Q4’18, the list of indicators flashing yellow became longer and brighter for the US economy. While there is insufficient evidence to make a recession call, there is enough presently to suggest growing potential for sectoral recessions, à la 2015.”

FTR’s vice president of trucking, Avery Vise recently said of trucking’s business outlook for 2019, “At this point we expect trucking conditions still to be slightly positive by the end of the year, although the downside risks clearly seem greater than the upside.”

In a release this week Vieth said ACT Research analysts are evaluating the affects of the current global economic slowdown, increased trepidation on Wall Street and other factors. “We are working to interpret the meaning of falling stock markets, the flight to safety in bonds, the downward spiral in energy and industrial commodity prices, and accumulating evidence of a global slowdown, which have caused the perspectives on the next six to eight quarters to become hazy, with downside risks.”

Adding fuel to the fears are recent reports from DAT Solutions indicating that last week marked the lowest van load-to-truck ratio since May of 2017. The van load-to-truck ratio dropped 19%, from 4.6 to 3.7 loads per truck.

A trend of surging capacity is causing rates to fall according to the most recent DAT Trendlines reports. The report ending the week of January 19, stated, “Truckload capacity has returned to the market in force, and national average rates for dry vanreefers and flatbeds continue to decline in a typical seasonal slump.”

In it’s Trendlines report ending the week of January 12, DAT said, “The surge in capacity and less urgency on the part of shippers knocked down national average rates for dry van, refrigerated and flatbed freight.”

Spot load prices have fallen below contract rates after double-digit increases in 2018, according to a report by Trucks.com. When you add it all up, economic pessimism is beginning to creep into the psyche of investors and a growing number of trucking industry stakeholders.

Featured image courtesy of Daimler/Western Star

 

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