Fleetowner 1271 Freightshotsm
Fleetowner 1271 Freightshotsm
Fleetowner 1271 Freightshotsm
Fleetowner 1271 Freightshotsm
Fleetowner 1271 Freightshotsm

Freight recovering – but only for some

Feb. 28, 2008
Despite an overall U.S. economy still in turmoil, there are signs that truckload freight volumes are starting to recover, albeit slowly and only in selected segments.

Despite an overall U.S. economy still in turmoil, there are signs that truckload freight volumes are starting to recover, albeit slowly and only in selected segments. However, experts caution that the trucking industry isn't out of the woods yet and won't probably see a full freight recovery until the second half of the year.

The lobbying group American Trucking Assns. (ATA) reported that its for-hire truck tonnage index increased 2.4% in January this year, following two months of increases at the end of 2007 – a 0.9% jump in November followed a 1.5% increase in December. ATA noted that it revised its original December 2007 index down from 4.1% to 1.5% based on additional year-end data.

Bob Costello, ATA's chief economist, said January's strength is a good sign, but he stopped short of saying that truck tonnage is on the road to recovery.

"The economy is either in a mild recession or on the brink of one, and we are hearing anecdotal reports that freight volumes slowed in February," he said. "I anticipate that truck tonnage will recover before the general economy, but I am withholding judgment on whether truck tonnage is in a recovery mode until I analyze another month or two of data."

Such caution is well placed, as the overall picture for the U.S. economy remains gloomy. Ben Bernanke, chairman of Federal Reserve, said in testimony yesterday before the committee on financial services in the U.S. House of Representatives that the U.S. economic situation has become distinctly less favorable.

"Strains in financial markets, which first became evident late last summer, have persisted, while pressures on bank capital and the continued poor functioning of markets for securitized credit have led to tighter credit conditions for many households and businesses," Bernanke said.

He added that U.S. gross domestic product (GDP) growth held up well through the third quarter last year despite the financial turmoil, but it has since slowed sharply. Labor market conditions have similarly softened, as job creation has slowed and the unemployment rate – at 4.9% in January – has moved up somewhat.

"Many of the challenges now facing our economy stem from the continuing contraction of the U.S. housing market," Bernanke noted. "Housing starts and sales of new homes are now less than half of their respective peaks, and house prices have flattened or declined in most areas. Weaker house prices in turn have contributed to the deterioration in the performance of mortgage-related securities and reduced the availability of mortgage credit. The housing market is expected to continue to weigh on economic activity in coming quarters."

However, Chris Brady, president of Commercial Motor Vehicle Consulting, sees some bright spots for truckers – especially those hauling goods for export, along with agricultural and mining commodities.

"The global economy is still relatively strong, which is increasing demand for many types of goods," he told FleetOwner. "On top of that, the depreciation of the dollar is making U.S. goods more attractive."

Yet Brady still forecasts a weak first half of the year for freight volumes, as retailers will be conservative with their inventory levels heading into spring. "We won't see a severe inventory correction, but there will be a moderate one as earnings for retailers were weak coming out of the holiday season," he said. "For fleets, it's all going to depend on your customer base. If it's based on consumer goods, it'll remain tough."

About the Author

Sean Kilcarr | Editor in Chief

Sean reports and comments on trends affecting the many different strata of the trucking industry -- light and medium duty fleets up through over-the-road truckload, less-than-truckload, and private fleet operations Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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