TRUCKING LOOKING UP OVER NEXT YEAR.
By: Phil Sneed
TANDEM LOGISTICS NEWS FEED 7/11/2011:
New reports out from two expert trucking-services firms indicate the second half of this year on into 2012 can expect strong freight volumes and paint strong expectations that motor carriers will see strong freight volumes and rate increases and the strong possibility that pent-up demand for trucks may be constrained by supplier capacity.
The prior survey was at a 90% level, but the weakness reported in several areas of the economy had its impact, said Richard Mikes, TCP partner and survey founder.
However, TCP expects the second half of this year to likely show potentially more positive signs, pointed out Lana Batts, TCP partner. She noted that larger carriers (over $25 million in revenue) are more optimistic, as 88% expect business volume increases compared to the 71% reported by smaller carriers.
And for the second consecutive quarter, 90% of the carriers responding expect rate increases in the year ahead, according to Mikes. Even if the economy slows from previous predictions, he explained, rate increases will likely continue given the conservative hesitancy of carriers to add little equipment beyond replacement levels. What’s more, he added, larger carriers are somewhat more optimistic– 93% vs. 81% for the smaller carriers.
More importantly, according to Mikes and Batts, this is the first time no one expected rates to decrease since the question was first asked in the first quarter of 2009. They stated that the general supply and demand equilibrium continues to shift towards carriers as little capacity increase is evident and modest GDP gains are still forecast; thus, assuring tightness likely over the next couple of years.
In addition, they said spot-rate markets are showing some diversity over the last quarter, depending on region and type of carrier as well as some weather impacts being reported. Mikes and Batts noted that the second half of 2011 is expected to reflect higher rates as the general economy is forecast to improve.
And they also pointed out that truck supply conditions forecast in an earlier TCP white paper are generally still on target favoring carriers.
Not surprisingly, given the positive tone of the TCP survey, the stage is set for a long run-up in Class 8 demand, according to the most recent data reported by ACT Research.
While we have reduced our expectations for US economic growth somewhat, we still expect the overall economy to progress close to trend over during 2011 and into 2012, said Sam Kahan, ACT chief economist. There might be a soft patch in freight over the next month or two, but demand for Class 8 trucks continues to be strong. We feel that the industry’s ability to ‘build’ might actually be a volume constraint in 2011.
Despite some recent easing in freight growth and a softening in the path of the U.S. economy, demand for commercial vehicles continues to be strong, stated ACT. Widespread strength was apparent across all segments of the commercial vehicle market, the firm noted.
The June edition of the ACT North American Commercial Vehicle OUTLOOK reflects solid commercial vehicle demand through 2011 and well into 2012. According to ACT, this demand reflects pent-up replacement needs and improved financial performance by fleets, which is now being supported by improved credit availability at least for well-qualified customers.
Jun 2011 By David Cullen, executive editor at Fleet Owner