Tonnage and truck sales stayed more than strong at the close of 2014, which many industry experts believe offers very positive portents for trucking as the New Year picks up speed.
For starters, the American Trucking Associations (ATA) reported that while its for-hire truck tonnage index remained unchanged in December, following a jump of 3.5% during November, for all of 2014, tonnage increased 3.5% over 2013.
In the view of ATA Chief Economist Bob Costello, that’s a very good sign.
“Economic data was mixed in December, with retail sales down 0.9% and factory output up 0.3%, so tonnage was in-between those two readings, which are two large drivers of truck freight,” he explained. “[But] overall, 2014 was a good year for truck tonnage with significant gains throughout the year after falling 4.5% in January [2014] alone.”
Costello added that freight volumes “look good” going into 2015. “Expect acceleration in consumer spending and factory output to offset the weakness in hydraulic fracking this year,” he noted.
Those positive freight numbers helped buoy truck sales in 2014 as well, according to data tracked by ACT Research.
The firm said Class 8 orders topped 40,000 units for a third consecutive month in December – reaching 44,060 – while Class 5-7 orders reached their highest monthly volume since 2008, hitting 22,964 units.
For 2014, Kenny Vieth – ACT’s president and senior analyst – pointed out that Class 8 net orders exceeded 380,200 units, up 42% from 2013.
“Class 8 orders have topped expectations for eight consecutive months,” he added. “The fourth quarter order volume of 130,900 units constitutes the strongest three-month stretch since [the] pre-buy inflamed first quarter of 2006 when 140,000 net orders were booked.”
While Class 5-7 orders did not experience as robust a recovery as the Class 8 segment did in 2014, Vieth noted that the medium-duty market also experienced a very good 2014 with a particularly strong ending.
“For the full year, Class 5-7 net orders totaled 223,250 units – the best since 2006,” he stressed. “The order improvement was broad based, with trucks up 15%, buses up 23%, and RVs [recreational vehicles up 17%. The only negative was step vans, which saw order decline 12%.”
Still, John Larkin – managing director & head of transportation capital markets research for Wall Street investment firm Stifel Nicolaus & Co. – noted in the company’s most recent freight industry analysis that most TL carriers are still not adding capacity, except for those tied to specific dedicated fleet contracts, though many of them are now also offering complementary services such as truck brokerage, intermodal, supply chain planning, distribution center management/contract logistics.
As a result, he still believes a bigger truck capacity shortage is likely on tap for 2016 and beyond when additional federal safety regulations begin to kick in.
Nearer term, though, Larkin is projecting higher rates for TL capacity in 2015 after general contract rates increased 4% to 6% year-over-year in the second half of 2014, while general dedicated rates jumped 2% to 4% year-over-year during the same timeframe.
“Price increases in exchange for capacity commitments from well-capitalized, well systematized large fleets should become more widely available as supply/demand tightness further intensifies,” he added, noting that will place “renewed focus” on dedicated deals to lock-in base load capacity as well as drive more increased shipper/carrier collaboration to eliminate delays, empty miles, inefficient loading patterns, and poor treatment of drivers.
“Competition has intensified, especially for generic dedicated deals,” Larkin said.
