Trucking has a long tradition of downplaying good news. I don't know if it's driven by superstitious fear that talking about good times will only bring bad luck or by a desire to stay under the competition's radar, but there's this strong tendency among fleet executives to gloss over good economic signs and look for the next downturn.
The first few years of this century were rough ones for trucking businesses of all types, but the signs are impossible to ignore now that we've finally entered an upturn and that it's likely to stick around for a few years.
Clearly the general economy is on the upswing, with most economists pointing to mid 2003 as the turnaround point. Despite fears that new engine emissions would cripple operations and lingering high costs for both fuel and insurance, trucking ran well ahead of that upswing. One after another, the major for-hire carriers are releasing year-end reports filled with strong revenues and in many cases record increases in profits.
Despite well-publicized worries over productivity losses from the hours-of-service changes, 2004 is actually shaping up to bring more of the same strong performance for trucking businesses, and better still, predictions are the good times will last at least until 2007. With shippers concerned about finding enough reliable capacity for freight in a now growing economy, fleets have been able to use HOS to address long-standing problems with loading delays while at the same time introduce some much needed rate increases.
One reason for optimism is that capacity pressure isn't likely to fade. Surging freight volumes at the end of 2003 seem to be carrying into 2004 with indicators like GDP and factory activity continuing to climb in January. Add continued low interest rates, indications that the Federal Reserve isn't about to raise those rates any time soon, little to no inflation and a surge in export activity driven by the lower value of the dollar, and you have everything in place for a broad based expansion that will carry trucking along with it.
If you're one of trucking's die-hard pessimists, a look at truck-sales projections for the next three years should be enough to make you rethink your traditional skepticism. Both truck makers and their major suppliers — people who have a lot riding on accurate predictions — believe that Class 8 production in North America will hit between 230,000 and 245,000 units this year. In 2005, they see that number growing to 270,000 units. And 2006 is expected to top 300,000 Class 8 trucks, which puts it beyond the current record output level of 2000.
Yes, oil prices remain high and seem vulnerable to more instability. Yes, insurance costs continue to drain dollars from the industry. Yes, the driver shortage continues to cast a long shadow. And yes, terrorism or something catastrophic from outside the realm of economics could derail this upward cycle.
Even if we avoid the worst, history has shown us that the tough times will be back soon enough. But for once, let's admit that things right now are better than they've been in a while and take some satisfaction from success.
E-mail: [email protected]
Web site: fleetowner.com
