Kenny Vieth is about as steely-eyed as any of the analysts who cover trucking for a living. As president and senior analyst at ACT Research, he’s also someone who takes a hard, unflinching look at industry issues, too, such as on how federal regulations are aggravating the truck driver shortage.
Yet the data his firm collects on a monthly basis regarding commercial vehicle orders, as well as on freight volumes, may indicate something of a rebound in trucking’s prospects may be underway.
Take ACT’s latest for-hire trucking index reading as but one example: it showed the freight component of the index rising faster than the capacity component, boosting the “spread” to a level not seen since early 2014.
That suggests that the process of “rebalancing capacity” that started in the second half of 2016 accelerated in early 2017, Vieth said, which could be a good omen for freight rates down the road.
“Hopefully, January’s readings represent a sustainable improvement in freight creation as rising commodity prices boost investment and lead to increased demand for machinery," Vieth explained in a statement.
“Of course, as the move was such a strong deviation from the trend, some of January’s high-side surprise may be related to longer plant shutdowns in December as inventories continued to be rebalanced,” he stressed.
Yet both the volume and productivity indexes improved in January, Vieth pointed out – rising to levels last seen in early 2014, which is considered “high water mark” of sorts for freight demand in recent times.
He said ACT’s volume reading soared almost 23 points from December to 67.7 in January, with that rise in freight volumes triggered what Vieth dubbed a “sympathetic rise” in the productivity index, which climbed 14 points to 61.3 in January.
John Larkin, managing director and head of transportation capital markets research for Stifel Capital Markets, recently noted that some of this may be due more to a “hope springs eternal” mindset among the U.S. business community as a whole regarding the potential for tax cuts and a “regulatory rollback” effort of some type promised by the Trump administration.
“With the surprise election of Donald J. Trump as the 45th President of the United States, investors have become decidedly more bullish in recent months, particularly with respect to freight transportation and logistics stocks,” he explained in a recent research note.
“If President Trump is able to push through even just a portion of his pro-business agenda, demand should continue to recover,” Larkin added.
He noted that the key elements of the President’s pro-business agenda include (1) a simplified tax code, including lower marginal rates and investment incentives, (2) an energy self-sufficiency program, (3) a large-scale infrastructure plan, (4) insourcing, re-shoring, and automation of manufacturing operations, (5) a roll back of regulations, and (6) a leveling of the playing field on the trade front.
All of those efforts could have a “positive effect” on domestic freight volumes in Larkin’s view, and, in turn, a positive impact on domestic transportation and logistics companies – including, of course, motor carriers.
“International transportation and logistics companies may not be as fortunate, but their success, or lack thereof, will hinge upon the extent to which international tract pacts are altered,” he emphasized.
Will this come to pass as predicted or, more accurately, hoped for? Not even a month into Trump’s presidency it’s way too soon to know. But for now the data seems to indicate brighter days seem to be ahead for trucking. We’ll that particular sun does indeed come out to shin on the industry.
