Digital Edition

Jan.12, 2015

Issue link:

Contents of this Issue


Page 101 of 163

100 THE JOURNAL OF COMMERCE JANUARY 12.2015 2015 ANNUAL REVIEW & OUTLOOK TRUCKING IN PERSPECTIVE Trucking in the Eye of the Storm I n this column last year, FTR Transportation Intel- ligence predicted a bumpy ride for 2014 in trucking, using phrases such as "modest growth meets static capacity," "it's all about drivers" and "it's not a wave of regulations, it's a storm surge." Now, with 2014 in the rearview mirror, we can say our outlook was fairly on the mark. So where do we see things going for 2015, and will the coming months see a repeat of 2014's stormy conditions? It's a tough call, because the current balance is precarious, so swings of just a point or two can make all the difference. To put it metaphorically, when you are stand- ing on the edge of a cliff, just one more step can result in a radically different outcome. Our current view is that things won't fall off the cliff in 2015, but given the current trajectory, 2016 may be another story. There is no question that capacity is tight and that the driver shortage is real. FTR estimates active truck utilization is running about 97.5 percent. Critically, this level, although very high, is down a bit from the heights seen in early 2014. The difference, although small, is enough to keep the situation below the tipping point where shippers need to scramble to obtain capacity. It's high enough, how- ever, to keep upward pressure on rates. FTR has consistently maintained that the major capac- ity risk for trucking has been regulatory. It's the regulations in the pipeline that eventually will cause the truck capacity situation to turn critical. The important question is "when?" This is a political question and a risky one to answer, but it's safe to say that things won't happen any sooner than current expectations and perhaps will get pushed back. Some may say that with Republican control of both houses of Congress and an acting administrator in charge of the Federal Motor Carrier Safety Administration, we should expect a dramatic slowdown in regulatory activ- ity and perhaps a rollback of current hours-of-service regulations. Although possible, FTR doesn't agree with this thesis and believes the major items in the current regulatory agenda have a great deal of momentum and are unlikely to be waylaid. Even so, despite all the regula- tions in the pipeline, 2015 is shaping up as a relatively quiet year in terms of actual implementation. The FMCSA has pushed a few of the major programs out by six to 12 months. Some blockbuster items remain in the regulatory pipeline, most notably electronic logging devices and mandatory speed governing. When imple- mented, ELDs will have the near-term effect of reducing capacity as carriers that have been shading the rules with paper logs are brought into line with the hours-of-service regulations. Speed governing will bring an immediate and permanent reduction in capacity as trucks and drivers slow down and generate fewer miles per day. It's important to note, however, that these are now programmed for 2016 at the earliest, and implementation could slip further because of the normal variations in the regulatory process or court challenge. So, if regulation won't provide further tightening of truck capacity in 2015, what about economic growth? Our expectation here is also muted. It's true that economic growth rate has picked up lately, but this isn't translat- ing directly into equivalent growth in demand for truck transportation. The complexion of the economy's growth is changing, morphing from a manufacturing-industrial mix to a more varied composition, including greater slices of retail and ser- vices. Although important in generating personal income and improving employment, growth in these sectors doesn't pro- duce the same kind of increase in trucking demand as growth in manufacturing does. The net result is continued but modest growth in truck loadings in the vicinity of about 4 percent a year, a rate with which truckers can keep pace. The combination of the lack B Y LAW R E N C E G RO S S

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - Jan.12, 2015