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July27, 2015

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38 THE JOURNAL OF COMMERCE www.joc.com JULY 27.2015 TRUCKING MARKET SPECIAL REPORT U.S. shippers this year have enjoyed a breather from the frenetic pace of demand and tightening over-the-road truck capacity that drove rates higher much more force- fully in 2014. But the pace of growth is picking up, and is expected to accelerate in the second half of 2015. That means more pressure on truck capacity, and more pressure on rates. And even without strong economic growth, capacity will face increasing chal- lenges as a host of new U.S. regulatory requirements exacerbate the ongoing driver shortage. Shippers also are benefiting from low fuel prices, which depressed fuel sur- charges. In some cases, shippers reported paying lower overall costs despite higher base rates, thanks to lower fuel prices. Higher fuel prices would put more pressure on transportation costs and budgets. The U.S. economy practically roared for a time last year, with real gross domes- tic product expanding 4.6 percent and 5 percent in the second and third quarters, respectively. In fact, U.S. GDP expanded more than 3.5 percent in four of the five quarters that ended in the third quarter of 2014. That's the best period of growth the U.S. has seen since the mid-2000s. That growth was a shot in the arm for shippers and trucking. The trucking industry as a whole — including for-hire and private carriers — had more than $700 billion in total revenue last year, according to an American Trucking Associations estimate. The combined revenue of the 50 largest U.S. trucking companies shot up 10 percent last year, nearly double the 2013 growth rate, data from SJ Consulting Group show. The 21 publicly owned motor carriers tracked by The Journal of Commerce increased revenue 12.2 percent year-over-year in last year's second quarter and 10.4 percent in the third quarter. Then, after hitting its fastest period of sustained growth since 2005, the U.S. economy blew a gasket. GDP growth slowed to 2.2 percent in the fourth quarter and contracted 0.2 percent in this year's first quarter. That's not as bad a contraction as the 2.2 percent drop in GDP delivered by the polar vortex in early 2014, but it derailed expectations of more solid growth. Complicating the economic picture is the strong U.S. dollar, which discourages exports, and low oil and fuel prices, which have helped consumers but depressed capi- tal investment in the energy business. That has had a knock-on effect across several related industries. U.S. spot market truck rates, which rose dramatically in 2014, slipped from those highs in the first half of 2015. Even so, the average rates tracked by DAT Solutions have climbed on a year-over-year basis. Dry van rates rose 4.7 percent year-over-year in May, DAT said. Contract rates, renewed on an annual basis, have continued to climb, despite the slowdown. Truckload rates are expected to rise 3 to 5 percent and less-than-truckload rates, 2 to 4 percent this year, David G. Ross, a managing director at Stifel, told the SMC3 Connections 2015 conference in June. SHIPPERS, TAKE A DEEP BREATH. The current lull in rising contract truck rates, not to mention lower spot market rates, won't last. Trucking companies may have eased back on the pricing pedal for a few months as the economy hit a soft patch, but they're likely to regain some traction and exert more pressure in the coming year as the economy expands and capacity tightens.

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