Though the U.S. economy is behaving far more sluggishly than expected, freight analysts with Wall Street investment firm Robert W. Baird & Co. believe that continuing “capacity restraints” within trucking – especially the truckload sector – should protect the industry’s bottom line if freight volumes slow more than expected.
However, based on the firm’s current data, freight volumes continue to “normalize” so trucking should remain in a good spot despite larger macroeconomic instability, noted Benjamin Hartford, one of Bair’s transportation and logistics experts.
After a sluggish start to the second quarter, freight trends experienced an expected seasonal uptick during the final weeks of May,” he noted in Baird’s most recent Freight Flows briefing.
“Following unprecedented volatility in recent years, we believe freight trends are returning to ‘normal’ seasonal patterns and downside risk to demand is protected by lean inventory strategies, particularly among retail shippers, and falling fuel prices,” he explained.
“Further, shippers remain concerned about access to capacity in upcoming years, supporting underlying freight rates,” Hartford added, pointing out that while spot TL pricing growth has slowed, core TL contractual rate growth remains within the 2% to 4% year-over-year increases predicted by Baird, with LTL rate growth remaining at or above the upper-end of this range.
“Also, despite the near-term uncertainty, shippers remain guardedly optimistic about demand” for freight services in the second half of 2012. “A key distinguishing feature of this cycle has been the continued contraction of industry capacity despite improved demand conditions. As a result, supply and demand dynamics remain tight and support continued pricing growth in a slow growth economy.”