Summer's near; trucking's in high gear
Jun 9, 2004 1:44 PM, by Sean Kilcarr
There's a lot of good news out there as truckers roll into the summer months of 2004. Factory orders for durable goods are up 17.5% over 2003, manufacturing is growing at 5.5%, trucking tonnage is up in a big way—6.7% versus the same point a year ago—and the impact of new hours-of-service (HOS) rules hasn’t been as severe as expected.
“There’s a significant amount of freight to be hauled from this much-stronger economy,” said Bob Costello, chief economist for the American Trucking Associations (ATA). “So it’s no surprise that truck tonnage is robust, increasing again in April by 2.2%.”
Costello said he continues to be “very optimistic” about the outlook for the general economy and the trucking industry. “Solid manufacturing production, inventory rebuilding, and strong retail sales will keep motor carriers busy for some time,” he said.
However, despite those robust statistics, all truckers are struggling with ever-mounting fuel prices, and fleets are dealing with a growing dearth of drivers. These factors may hamper trucking’s ability to haul all the freight out there.
“The current spike in fuel prices punctuates the challenges facing transportation operators,” said Marc Mitchell, director of the transportation practice at Enterprise Information Solutions.
“Fuel prices show a 33% increase since 1994 according to the United States Department of Energy. Also there’s been an even larger percentage increase in insurance and general wage expenses over a similar period of time,” Mitchell said. “Meanwhile, the overall rates being charged for transporting goods have been largely constrained. The simple combination of rising operating expenses and constrained rates make for a situation where eventually something is going to have to give.”
Still, Costello thinks the impact of high fuel prices won’t be as severe as many in trucking seem to believe. “In reality, it may have a marginal impact this summer. It won’t have a severe impact,” he said. “I don’t want to downplay the energy issue, but in real terms adjusted for inflation, oil prices have not really kept up with overall inflation. That’s one positive tick. So in terms of derailing the economy, it (high fuel costs) may have only a slight impact.”
Productivity losses due to HOS rules are running at about 3% according to industry data, far below the 19% losses feared by many experts. But that still translates into a need for more drivers, a need many carriers report is hard to fill.
According to Costello, driver turnover remains a major issue. “We’re still talking over 100% percent annualized turnover,” he said. “It’s going to constrain capacity, but not just because it’s a shortage of drivers; it’s a shortage of quality drivers.”
Adding to the strain are predictions of greater-than-usual highway congestion this summer as forecasted by the American Automobile Association, resulting in higher fuel demand as well as longer transit times.
Even with all of those factors putting more pressure on trucking operations, strong freight demand is contributing to an upbeat mood, even helping to spur investments in trucks and trailers.
According to consulting firm CK Marketing’s informal Fleet Sentiment Report, demand for trucks and trailers for the remainder of 2004 remains strong.
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