Despite rising concern in recent weeks about the U.S. economy’s footing, the fundamentals for freight demand in 2019 remain mostly positive, said analysts at FTR on Thursday.
Speaking in the firm’s monthly State of Freight webinar series, forecasters Avery Vise and Eric Starks said they expect freight movement to remain healthy in 2019, though the market will continue to moderate from the surge seen in late 2017 and through the first half of 2018. “We expect a growing transportation sector in 2019,” said Vise. “Not explosive by any stretch. We will really just be moving back toward a normal market.”
Major freight-producing sectors like manufacturing and construction remain stable, as do broader economic indicators like employment and retail spending, they said. “We don’t anticipate a significant pullback from 2018” freight demand, said Starks. “The key freight drivers remain fundamentally strong, even if growth does start to abate.”
The stock market’s volatile swings over the past month are “making people jumpy,” said Starks. Over a three-week period in December, the Dow Jones Industrial Average plummeted 15 percent. Since Christmas Eve, it’s climbed 10 percent, Starks noted. But “the stock market is not the economy,” he said, though it’s not unrelated to the economy’s health, he added. As companies announce their fourth quarter and 2018 earnings in the coming weeks, “we’ll have a better picture of where things stand,” he said.
The freight market hasn’t seen the volatility that the stock market has, Vise said, and has instead continued to steadily grow. “However, late in 2Q we saw loadings flatten out,” he said, which took pressure off of the capacity constraints seen in 2018 and could point to greater volatility in store for 2019.
Truck orders fell sharply at the end of 2018 after setting records in the second and third quarters, though that’s likely not a major cause for concern, says Vise. “The drop in truck orders says as much about the constraints of truck production as it does the freight market,” he said. In addition to fleet confidence waning slightly, truck makers are having a hard time keeping up with order demand. Long lead times for delivery are likely “discouraging truck orders,” Vise says.
Indices measuring the strength of the manufacturing and construction sectors are still positive, the pair said, though they’re not as strong as they were in recent months. Likewise, indicators like retail spending, retail inventories, unemployment and energy pricing aren’t as strong as they were, pointing to a moderation in the market, but not a recession or downturn.
Vise notes that as the freight market regains balance this year, there will be a “return to norm” with relationships between shippers and carriers.