Surveys See Lagging Freight Demand, Capacity Constraints Persisting in 2011

This story appears in the Dec. 20 & 27 print edition of Transport Topics.

Recent surveys of carriers and shippers are signaling that slower freight demand growth and continued capacity constraints will be common phrases within the trucking industry during 2011.

A fourth-quarter survey of shippers pegged volume growth over the next 12 months at 3.2%, according to a report issued by industry analyst Wolfe Trahan. Combined, the shippers in the survey spend more than $25 billion annually on transportation.

While the latest survey projected growth, the expected pace was slower than the 3.8% projection in the previous report because inventory levels have increased, Wolfe Trahan said in its report.

“Shipper expectations for volume growth over the next year slowed,” the Dec. 6 report said. “Expectations for future inventory-based shipping also decelerated” because more shippers believe inventory is at above-average levels.

On the carrier side, a survey of approximately 150 fleets by consulting firm Transport Capital Partners cited more equipment and driver constraints ahead.

“While carriers appear ready to replace an aging fleet, they have less appetite to expand their fleet capacity,” the consulting firm said in a statement.

TCP’s outlook, published Dec. 7, found that 34% are planning to add equipment in the next 12 months. However, that percentage was below the 41% of fleets noted in its third-quarter survey.

“These acquisition plans are principally replacements for aging fleets, but expected freight volume increases have acquisition plans ramping up modestly,” said Richard Mikes, a partner at TCP.

The consulting firm also forecast modest driver additions, saying that more than 75% of fleets intend to increase their ranks by 1% to 10%.

Pressure on the driver market will result in wage increases as much as 5%, two-thirds of fleets surveyed by TCP said.

“Even with a weak economy approaching 10% unemployment, this increase affirms an underlying capacity constraint,” said Mikes.

Wolfe’s survey also found an expectation of tightening capacity.

“Shippers expect tighter capacity going forward, which we attribute in part to expectations for driver supply” in the truckload sector, the report said.

That tightness was linked to implementation of the federal Compliance Safety Accountability program — or CSA — and expected reductions in driver hours when the hours-of-service rules are revised.

Capacity concerns will continue to predominate in the truckload sector, the analyst report said. On the less-than-truckload side, the survey found that customers expect little change in capacity, barring unexpected developments within the sector, Wolfe Trahan said.

Wolfe Trahan’s survey also noted that rates are expected to rise at a moderate pace in both parts of the industry, with an average 2.7% increase in truckload and 2.5% in less-than-truckload.

Two other recent reports, the Ceridian-UCLA Pulse of Commerce Index, or PCI, and a report by Robert W. Baird & Co. analyst Jon Langenfeld highlighted lackluster demand.

Ed Leamer, chief PCI economist, described the 4.5% rise in the index — which is based on diesel fuel purchases by truckers — during November as “only mildly encouraging.”

Although the index has risen for 12 consecutive months, Leamer said, it is “below levels needed for rapid recovery.”

Langenfeld, in a Dec. 13 report, said November freight levels in Asian ports rose faster than expected, but he cited a different reason.

“Industry shipper contacts interested in avoiding the run-up ahead of Chinese New Year have indicated a willingness to take advantage of the traditionally weaker shipping months of November and December, likely explaining part of the strength experienced in November,” his report said.

Chinese New Year, which begins on Feb. 3 in 2011, typically triggers a two-week factory shutdown in the region.