INDIANAPOLIS. Barring unforeseeable events, it appears pretty solid that the U.S. economy-- and freight along with it-- will head through 2015 at roughly the same level of positive, if modest, growth witnessed so far this year.
That's the upshot of the many economic indicators and indices as well as freight-specific risk factors discussed by economists and analysts here during the first day of the annual FTR Transportation Conference.
FTR itself stated what it’s now projecting for several key indicators of economic health, including:
- GDP will grow by 2.1% this year, then by 2.9% in 2015
- Industrial Production will be up 4.1% this year, then by 3.5% in 2015
- Consumer Price Index will be at 2.0% this year, then at 2.4% in 2015
- Housing starts will number 980,000 this year, then reach 1,090,000 in 2015
- Freight growth will rise by 3.4% this year, then be up 2.9% in 2015
Summing up the content of consecutive economics-oriented sessions, FTR president Eric Starks told FleetOwner that “the growth in the economy and the freight markets recorded this year will continue at similar levels in 2015. As to forecasting what will happen in 2016, at this point there is uncertainty about what those levels will be.”
Moving on to the specifics on where the Class 8 trucking market is headed, Starks said that “manufacturing drives the equipment market” and noted that an important indicator of the underlying strength of the market now is the ISM (Institute for Supply Management) Manufacturing Index.
He pointed out that that index “continues to move upward” and it has been indicating economic expansion through July of this year.
“Business activity, as evidenced by the upward trend in core capital-goods orders, is now near its pre-recession peak,” Starks continued. As of June, per Census Bureau figures, those orders reached a level comfortably north of $70 billion. By comparison, in 2009 they dipped down nearly to $45 billion.
“The American Trucking Assns. (ATA) and FTR are finding freight levels are healthy, being up 3 to 4%,” he said. “And both ATA and FTR are now charting that growth the same—which indicates there’s less volatility in the market as well.”
Noting that there is “no one data point you can consider” to take the freight market’s temperature, Starks went on to forecast the annual percent change in monthly truck freight loadings originated by equipment type:
- Dry vans, now up 2%, will be up to 3% in 2015 and back to 2% in 2016
- Reefers, which are up well below 2% now, will be up by just above 2% in both 2015 and 2016
- Bulks, now up by nearly 6%, will be dropping to up 4% in 2015 and below 4% in 2016
- Flatbeds, now up just above 8%, will climb to be up 10% in 2015 and then will be up above 8% in 2016
“Put all that into perspective,” said Starks, “and the freight-loadings forecast leads us to expect the peak level [of 700 million loads originated]recorded in 2006 will be exceeded in 2016 [when they should climb to nearly 750 million]… meaning modest freight growth can be expected going forward.”
Turning to new-truck order activity, Starks said that North American Class 8 orders “remain healthy and have stayed relatively strong through the summer months. Backlogs are also healthy and rising.
“An increase in truck utilization during 2013 effectively pushed new-truck demand into 2014,” he continued. As a result, he said Class 8 production figures this year are “looking a lot like those of 2011.” He added that data from FTR’s backlog analysis through July shows that truck builders had their build slots almost full in Q3.
With all these and other key indicators studied and analyzed, Starks said he is forecasting that North American Class 8 production will total 295,000 units in 2014. For 2015, he is predicting a total of 293,000 and for 2016, a total of 266,000 units.
Of course, all those projections compare favorably to the actual North American Class 8 North production recorded for 2013 of 243,000 units.
