How Good a Recovery?

While Wall Street continues to express its doubts about the strength of the U.S. economic recovery that is under way, most trucking companies say that business is continuing to improve.

And these companies are opening their checkbooks to renew and, in some cases, expand their fleets of tractors and trailers as freight levels increase.

While most officials agree that the recovery isn’t exactly an all-out boom, things are looking up for most fleets and suppliers.

Truck suppliers are beginning to recall furloughed workers and add production shifts at their factories.

And Wall Street’s analysts are expecting the upcoming wave of quarterly results from the nation’s public fleets to reflect these better times.

Trucking earnings are expected to improve by an average of 54%, based on the individual company estimates compiled by Bloomberg News as of July 8 (click here for this week’s p. 1 story).

Analysts are expecting the best results to come from truckload fleets, while some less-than-truckload firms are still lagging.

Concern continues, however, that the recovery may not have legs. Some analysts believe that growth will come to an end now that much of the federal stimulus program has run its course.

Other analysts, however, believe that inventories are still at historically low levels, and that replenishment will keep the recovery moving. That would be good for trucking, which is dependent on the retail, manufacturing and construction industries for financial health.

Meanwhile, fuel prices continue to hover around $3 a gallon, as crude moves between $70 and $80 a barrel.

The national retail diesel average has declined seven times in the past eight weeks and now stands at $2.924.

But more important, the relative steadiness in the average has made it easier for most fleets, since it is the rapid ups and downs that make it hard for carriers to recoup their costs through surcharges.

The Department of Energy predicted last week that retail diesel will average $2.98 a gallon for all of 2010, a 2-cent increase over its last estimate.

For 2011, DOE said it now expects diesel to average $3.13 a gallon, also 2 cents higher than its previous estimate.

Some fuel analysts have cautioned that a strong economic recovery could lead to sharp jumps in fuel prices as nations compete for diesel and gasoline. And while fuel has been down of late, diesel is still 33 cents a gallon higher than it was a year ago.

Let’s hope that the solution to one problem doesn’t ignite another.