Slow Growth to Continue in 2014 For Trucking, Economists Predict
This story appears in the Oct. 28 print edition of Transport Topics.
ORLANDO, Fla. — Trucking fleets are likely to shuffle down a familiar path of slow, steady improvement in overall economic conditions, general freight levels and equipment trends next year, according to three industry experts who spoke on a panel last week at American Trucking Associations’ Management Conference & Exhibition here.
“I don’t think we are going to see a dramatic change in 2014 from 2013,” Mark Vitner, managing director and chief economist at Wells Fargo, said Oct. 20 during the session.
He projected that gross domestic product will grow at a 2.4% rate next year, moving slightly above this year’s projected 2.2% pace. Vitner reinforced the plodding theme, saying he expects modest growth of 3% to 4% over 2012 in holiday sales.
Kenny Vieth, president of ACT Research, underscored that view from the equipment market perspective.
“We are right now in the midst of the great OK,” Vieth said, as U.S. truck production virtually matches replacement demand of 192,000 units. Fleets are delaying purchases for fear of adding too much capacity before a marked economic upturn.
ATA Chief Economist Bob Costello offered a similar perspective, citing 0.5% year-over-year growth in dry-van truckloads, the industry’s predominant freight sector. On the plus side, he said, dry-van truckload freight has been improving in recent weeks.
“The market is very choppy,” he said, with solid growth only in tank truck and intermodal freight. “Fleets tell me business is great for two weeks and then goes off a cliff.”
Analyst reports based on meetings with fleets at MC&E and other simultaneous meetings echoed the economists’ views.
“The economy remains mediocre at best,” Stifel Nicolaus analyst John Larkin said in an Oct. 22 report. “In general, freight, disappointingly, continues to move sideways. Many decision-makers in the private sector are reluctant to aggressively hire, invest in capital projects or carry any speculative inventory. Tank truck and flatbed operators are feeling a little better about demand but were reluctant to suggest that any recent uptick was sustainable.”
“Freight demand is growing year- over-year, but the economy remains stuck in an about 2% growth environment,” said Justin Yagerman at Deutsche Bank.
Costello did say the market is likely to change when there are two or three consecutive quarters of economic growth above 3%, stimulating more demand for freight.
That economic pickup, whose timing wasn’t specified, will create a “capacity crunch” for an industry that now is about in equilibrium between supply and demand.
“I know I sound a bit like a broken record,” Costello said, because he has foreseen the coming capacity squeeze for nearly two years from an economy that hasn’t improved as fast as he expected.
One bright spot, the 1.4% rise in ATA’s September tonnage that was announced Oct. 22, continues to be driven by heavier freight for manufacturing, housing and energy customers, the trade group said.
Another potential aid could be a resolution of federal budget troubles that could lead to further spending cuts in January, Vitner said. He said housing-market growth in 2013 was held back because it was the wettest summer ever in the South, where 53% of homes are built.
Vitner forecast a stronger market this fall to make up for weather-related construction delays. He also noted that projections call for a modest increase to 1.1 million new home starts next year, an improvement over 940,000 this year.
Next year also could be stronger for truck manufacturers, Vieth said, as the current fleet continues to age and productivity improvements from the latest generation of trucks further demonstrate enough savings to overcome higher costs.
