Trucking Hopeful for Gains
Stocks Surge After Federal Reserve Rate Cut
By Daniel P. Bearth, Staff Writer
This story appears in the Jan. 28 print edition of Transport Topics.
Congress, President Bush and the Federal Reserve agreed last week to several dramatic moves aimed at stimulating the U.S. economy, and trucking industry officials said they hoped the actions would boost the fortunes of freight haulers.
Trucking stocks surged along with the broad U.S. stock market, and some commentators said the freight-hauling industry, which has struggled with weak demand and high fuel costs over the past year, may have touched bottom.
Congressional leaders and Bush agreed Jan. 24 to a package of rebates and tax incentives — aimed at encouraging spending by consumers and businesses — two days after the Federal Reserve slashed the interest rate on money it loans to banks from 4.25% to 3.5%, a move designed to calm panicky financial markets.
Stock prices rallied and nearly all publicly owned trucking companies experienced significant gains in the days following the Fed’s action.
A number of trucking industry analysts said they believe freight volumes were poised to improve this year even without an economic stimulus.
“This hastens what we thought would happen anyway,” said John Barnes III, an analyst with BB&T Capital Markets in Richmond, Va.
Ed Wolfe of Bear, Stearns & Co. in New York, said freight volumes now are “close to a bottom” for both truck and rail carriers.
“While we don’t see improvement yet, at some point during 2008 we expect freight demand to strengthen for truck, rail and parcel [carriers],” Barnes said in a 2008 freight outlook report titled “In Like a Lamb, Out Like a Lion.”
Shares of YRC Worldwide, the nation’s largest less-than-truckload freight hauler, surged 22.5% on Jan. 23, and all but three public companies in the LTL and truckload sectors posted stock price gains for the week, according to transportation stock prices reported by Transport Topics.
American Trucking Associations President Bill Graves said he continues to have confidence in the U.S. economy.
“While the growth and expansion of the U.S. economy is clearly tepid at best, it is still a growing, expanding economy,” he said Jan. 23.
“In general, any fiscal or monetary policy that gives the economy a boost is a good thing for trucking,” said Bob Costello, ATA chief economist.
House Speaker Nancy Pelosi (D-Calif.) said Jan. 24 Congress would act on the $150 billion stimulus package “at the earliest date, so that those rebate checks will be in the mail.”
Individuals who pay taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the proposal. The package would allow businesses to write off 50% of the cost of capital equipment purchased in 2008.
Congressional Democrats dropped a proposal to boost spending on roads and other infrastructure as part of the stimulus package, although Senate Majority Leader Harry Reid of Nevada called for a long-term stimulus plan to build roads, utilities, schools and housing, Bloomberg News reported.
President Bush praised the agreement, saying the package “has the right set of policies and is the right size.”
Bush had said while he expects the economy to continue to grow slowly over the coming year, instability in housing and financial markets threaten to derail business and job growth.
“There is a risk of a downturn” he said.
Trucking industry consultant Martin Labbe of Martin Labbe Associates in Ormond Beach, Fla., said it’s possible that tax incentives in the stimulus plan could have a positive effect on sales of tractors and trailers, although he thinks the effect will be relatively small because of excess equipment on the market.
“Anyone who is making a decision now, this could push them into buying,” Labbe said. “You are not going to add equipment that you are not going to use.”
Demand for freight hauling has been soft for much of the past two years, and rising fuel costs have squeezed profits for many trucking companies.
“There are too many trucks chasing too little freight,” said Kenny Vieth, general manager of A.C.T. Research Co., which is based in Columbus, Ohio. Vieth spoke in a teleconference hosted by investment firm Stifel, Nicolaus & Co. on Jan. 22.
“Right now, we think there’s probably something in the neighborhood of about 70,000 too many trucks relative to the amount of freight to be hauled,” Vieth said.
In the latest government reports, the Commerce Department reported new housing starts fell 14.2% in December to a seasonally adjusted annual rate of 1.006 million units, a 16-year low.
Commerce also said retail sales fell 0.4% in December after a relatively strong 1% gain in November. For the year, retail sales rose 4.1%, the smallest gain in five years.
A Federal Reserve index of total manufacturing production rose 1.2% in December, the slowest year-over-year growth rate since October 2003.
This story appears in the Jan. 28 print edition of Transport Topics.
Congress, President Bush and the Federal Reserve agreed last week to several dramatic moves aimed at stimulating the U.S. economy, and trucking industry officials said they hoped the actions would boost the fortunes of freight haulers.
Trucking stocks surged along with the broad U.S. stock market, and some commentators said the freight-hauling industry, which has struggled with weak demand and high fuel costs over the past year, may have touched bottom.
Congressional leaders and Bush agreed Jan. 24 to a package of rebates and tax incentives — aimed at encouraging spending by consumers and businesses — two days after the Federal Reserve slashed the interest rate on money it loans to banks from 4.25% to 3.5%, a move designed to calm panicky financial markets.
Stock prices rallied and nearly all publicly owned trucking companies experienced significant gains in the days following the Fed’s action.
A number of trucking industry analysts said they believe freight volumes were poised to improve this year even without an economic stimulus.
“This hastens what we thought would happen anyway,” said John Barnes III, an analyst with BB&T Capital Markets in Richmond, Va.
Ed Wolfe of Bear, Stearns & Co. in New York, said freight volumes now are “close to a bottom” for both truck and rail carriers.
“While we don’t see improvement yet, at some point during 2008 we expect freight demand to strengthen for truck, rail and parcel [carriers],” Barnes said in a 2008 freight outlook report titled “In Like a Lamb, Out Like a Lion.”
Shares of YRC Worldwide, the nation’s largest less-than-truckload freight hauler, surged 22.5% on Jan. 23, and all but three public companies in the LTL and truckload sectors posted stock price gains for the week, according to transportation stock prices reported by Transport Topics.
American Trucking Associations President Bill Graves said he continues to have confidence in the U.S. economy.
“While the growth and expansion of the U.S. economy is clearly tepid at best, it is still a growing, expanding economy,” he said Jan. 23.
“In general, any fiscal or monetary policy that gives the economy a boost is a good thing for trucking,” said Bob Costello, ATA chief economist.
House Speaker Nancy Pelosi (D-Calif.) said Jan. 24 Congress would act on the $150 billion stimulus package “at the earliest date, so that those rebate checks will be in the mail.”
Individuals who pay taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the proposal. The package would allow businesses to write off 50% of the cost of capital equipment purchased in 2008.
Congressional Democrats dropped a proposal to boost spending on roads and other infrastructure as part of the stimulus package, although Senate Majority Leader Harry Reid of Nevada called for a long-term stimulus plan to build roads, utilities, schools and housing, Bloomberg News reported.
President Bush praised the agreement, saying the package “has the right set of policies and is the right size.”
Bush had said while he expects the economy to continue to grow slowly over the coming year, instability in housing and financial markets threaten to derail business and job growth.
“There is a risk of a downturn” he said.
Trucking industry consultant Martin Labbe of Martin Labbe Associates in Ormond Beach, Fla., said it’s possible that tax incentives in the stimulus plan could have a positive effect on sales of tractors and trailers, although he thinks the effect will be relatively small because of excess equipment on the market.
“Anyone who is making a decision now, this could push them into buying,” Labbe said. “You are not going to add equipment that you are not going to use.”
Demand for freight hauling has been soft for much of the past two years, and rising fuel costs have squeezed profits for many trucking companies.
“There are too many trucks chasing too little freight,” said Kenny Vieth, general manager of A.C.T. Research Co., which is based in Columbus, Ohio. Vieth spoke in a teleconference hosted by investment firm Stifel, Nicolaus & Co. on Jan. 22.
“Right now, we think there’s probably something in the neighborhood of about 70,000 too many trucks relative to the amount of freight to be hauled,” Vieth said.
In the latest government reports, the Commerce Department reported new housing starts fell 14.2% in December to a seasonally adjusted annual rate of 1.006 million units, a 16-year low.
Commerce also said retail sales fell 0.4% in December after a relatively strong 1% gain in November. For the year, retail sales rose 4.1%, the smallest gain in five years.
A Federal Reserve index of total manufacturing production rose 1.2% in December, the slowest year-over-year growth rate since October 2003.
