Trucking companies should take advantage of today’s economic recovery because it will be relatively brief by historical standards, and then the economy will fall back into recession, an FTR Associates economist forecast said April 19 in a CCJ online seminar.
“You better make hay now because after two or three years we’ll be right back in recession,” said Noel Perry, FTR managing director and senior consultant. “You only have a few years to put aside savings you’ll need for the next downturn.”
One reason he’s pessimistic is the weak housing industry outlook. Housing ownership is down and housing starts will remain low for many years to come. Construction and housing, which accounts for 14 percent of trucking freight, represented 37 percent of trucking’s decline since 2006.
Another problem that will make for a volatile market is the high level of federal debt and its impact on long-term interest rates. “Sometime in this decade, probably after the next election, we’re going to have to confront this problem,” Perry said.
Until that happens, trucking stands to prosper in the next few years. Manufacturing growth is outpacing nonmanufacturing and contributing to freight increases for trucking and other transportation sectors, Perry said.
Two factors that will contribute to short-term economic volatility are the aftermath of the Japan earthquake and oil. Japan’s output has slowed but will rebound this summer, which will benefit the U.S. trucking industry, Perry said. “This event will slow the economy for awhile and then speed it up,” he said.
On oil, Perry said the recent runup in prices is not based on a tightening supply but the market’s fear of what might happen to supply. He said he expected oil prices to decline this summer unless the Middle East unrest spreads to Saudi Arabia. If that occurs, $5 a gallon fuel will follow.
Perry forecast that the economic performance for the next 13 quarters “could be stronger than a lot of people think,” in part because of recoveries in the auto industry and perhaps housing. He estimated 5 percent trucking tonnage growth through 2013.
The economist predicted there will be far fewer people available to meet trucking’s demand for new drivers. He said the “regulatory drag” to meet new federal safety requirements could lead to a shortage of 250,000 drivers quarterly in 2012. Add to that replacing drivers eliminated in the recession and the industry could be searching for 400,000 drivers quarterly in 2012 and 2013, Perry estimated.
Without giving details, Perry predicted upcoming changes in shipper productivity that could impact trucking. “We’re on the cusp of a major change in how customers look at trucking,” he said. If changes take place, it could reduce the impact of the truck and driver shortage by about 100,000 units.