Freight to Remain Slow in 2013, Take off in 2014 and 2015

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Bob Costello, chief economist at American Trucking Associations, told attendees at The NATSO Show that freight will see some ups and downs in 2013 but said a more robust economy is waiting to be unleashed, which he expects to occur in 2014 and 2015.

“I see a much stronger recovery waiting to happen. When the economy feels it, trucking will feel it, and when trucking feels it, you will feel it,” he said.

Freight volume will increase from some industries, such as freight related to housing starts and auto sales, but slower manufacturing will drive down overall freight figures, Costello said.

“There are some headwinds for the consumer. These headwinds will keep growth in check a little bit before taking off,” Costello explained.

Better housing starts, auto sales and rebuilding from Sandy will make significant contributions to freight volumes in 2013. Costello said there were 781,000 housing starts in 2012—a 28 percent increase over 2011—and they’re expected to increase to 970,000 in 2013—a 24 percent increase over 2012. Consumer spending on goods is also on the rise. Consumers spend 4.3 percent more in 2012 than 2011 and spending is expected to increase 2.1 percent in 2013.

However, manufacturing output and business investment are slowing, Costello said. In addition, higher 2013 taxes will reduce GDP growth by roughly 0.5 percentage points this year. Although housing and auto manufacturing figures are on the rise, slower manufacturing output and consumer spending will prevail, he explained.

Costello expects manufacturing to pick up in the future. “We think there is going to be a resurgence of manufacturing not only in the U.S. but also in North America and this is good for trucking,” he said.

Costello reassured operators that although the railroads are pursing additional intermodal freight, trucks and trains “compete on a very, very limited basis.”

“Truck freight is not going to be converted to the railroads if it doesn’t go at least 500 miles and there are people out there who say it needs to go closer to 750. Only 15 percent of freight in the U.S. goes 500 miles,” Costello said. “Trucking hauls 9 billion tons of freight a year. The railroads haul 1 billion tons.”

Given the mixed freight forecast for 2013, fleets are cautious about capacity expansion. The industry operates fewer trucks than at its peak in 2007, but there is still a significant amount of pent-up demand for replacement equipment. Costello said that if the economy were to surprise on the upside, there simply wouldn’t be enough trucks on the road today to handle all of the freight.

The average age of today’s fleet is close to 6.8 years, which is near the all-time high, and some fleets that are having a difficult time buying the new equipment are “getting hammered” on maintenance costs of their older equipment. Costello said fleets’ credit situation is improving, but is still a challenge, leading to more finance leasing and little, if any, fleet growth.

The driver shortage, which is always an industry concern, remains a problem for the foreseeable future. Costello said the average number of new drivers needed per year over the next 10 years is 96,178.

Fortunately, the price of West Texas Intermediate Crude is expected to average $89.54 a barrel in 2013, a decrease from 2012’s average of $94.12, which should mean a drop in the average price for a gallon of diesel. While carriers welcome the news, Costello told attendees high fuel prices don’t generate the number of trucking failures they once did.

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One Response to Freight to Remain Slow in 2013, Take off in 2014 and 2015

  1. Coach Chris September 13, 2013 at 12:13 pm #

    Nice article. i also think that freight will be strong next year. I think that the demand for drivers will continue on exist and the ones that choose to remain join the industry as a driver will see better wages and work experience over all.

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