Two newly released reports abound with optimism. One paints an upbeat picture of the near-term future outlook for motor carrier rates and trucking volume growth; the other reflects the increasingly positive view of business conditions by executives in the equipment-finance market.
A new survey conducted by Transport Capital Partners (TCP) reveals “positive trends” for both volumes and rates, as expressed by motor carriers.
TCP said that results from its Second Quarter Business Expectations Survey“break a three-year trend of lowering expectations for volume growth in the second quarter. More carriers now report [they are] expecting volumes for the second quarter to hold steady.”
Opinions did diverge between larger carriers (over $25 million in revenues) and smaller carriers, TCP observed.
In both groups, 50% expect volumes will increase. However, almost 40% of the smaller carriers expect volumes will decrease, while just 3% of their larger competitors expect a decrease. And while 40% of the larger carriers expect volumes to remain the same, only 11% of the smaller carriers see volumes holding steady.
“Richard Mikes, a TCP partner, comments, “As the economy waits to sort out the cross currents of macro events and the change in Federal Reserve policies, freight volumes struggle to grow significantly,” commented Richard Mikes, a TCP partner and co-author of the study.
As for rates, TCP said those “remains in neutral” as the survey found alarge majority of carriers (80%) have seen rates hold steady over the past quarter.
On the other hand, most carriers (73%) are expecting rates to increase in the next 12 months. And those positive expectations are shared by both larger and smaller carriers.
More specifically, 18% of the carriers reported having seen rates increase-- rising 11% last quarter. However, that’s down from the 45% of the carriers that reported rate increases a year ago. In addition, more of the smaller carriers than the larger carriers—25% vs. 14%-- said they have seen rates increase.
“Even with modest improvement in freight demand, carriers are anticipating much needed higher rates from customers,” noted Steven Dutro, a TCP partner.
Per the Equipment Leasing & Finance Foundation (ELFF), its Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) for June scores confidence in the equipment-finance market at 57.3, which marks a rise from the May index’s reading of 56.7.
ELFF said that increase reflects “industry participants’ increasing optimism despite continued moderate growth of business investment in equipment. “
Asked about his outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, remarked in a fairly upbeat manner: “Demand for equipment leases has increased significantly over the last 60 days. Whether this is a seasonal factor or an indicator of an improving economy is subject to debate. If demand continues throughout the summer than perhaps we can give the nod to an improving economy.”
Taking a more conservative view albeit a positive stance as well, Anthony Cracchiolo, president &CEO of Vendor Services, U.S. Bank Equipment Finance observed: “The industry outlook is trending in a positive direction. However, the recent data reflects a single month and isn't yet indicative of a larger trend. While we are currently in a positive environment, U.S. Bank is well positioned to capitalize on the current market conditions.”
The equipment-finance confidence index itself found that:
- When asked to assess their business conditions over the next four months, 19.4% of executives responding said they believe business conditions will improve over the next four months, up from 9.7% in May. In addition, 71% of respondents believe business conditions will remain the same over the next four months, down from 87.1% in May. And 9.7% believe business conditions will worsen, up from 3.2% the previous month.
- 19.4% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 12.9% in May. What’s more, 71% believe demand will “remain the same” during the same four-month time period, down from 80.6% the previous month. And 9.7% believe demand will decline, up from 6.5% in May.
- 19.4% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 25.8% in May. Also, 80.6% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 74.2% the previous month. No one expects “less” access to capital, unchanged from May.
- 90.3% of the leadership evaluates the current U.S. economy as “fair,” unchanged from last month. Just 9.7% rate it as “poor,” also unchanged from May.
- 22.6% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 32.3% in May. In addition, 71% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 64.5% in May. On the other hand, only 6.5% believe economic conditions in the U.S. will worsen over the next six months, an increase from 3.2% who believed so last month.
ELFF noted that “confidence in the U.S. economy and the capital markets is a critical driver to the equipment-finance industry… when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall.”
TCP’s next Business Expectations Survey will launch in August. Carriers interested in participating will find information on that at transportcap.com/industry-survey.