Following a record year for freight demand and the highest tonnage in two decades, the trucking industry expects to see slower growth in 2019, a result of economic uncertainty.
A shortage of drivers and trucks, coupled with demand driven by a strong economy, pushed shipping rates sharply higher this past year. Motor carriers increased charges for both contract and spot-market freight by double digits.
Spot rates for freight were falling as the year ended, and availability of trucks was plentiful. Anticipating rates would keep rising, many shippers locked in freight contracts months ago to avoid unpredictable prices for last-minute trucking. The result is likely to be a smaller gap between contract and spot prices in the new year, according to DAT Solutions, which tracks load prices.
First six months
“Our projection is that freight growth is going to start the year at greater than 3 percent and then moderate to 2 percent in the second half,” said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence.
Overall, freight growth is expected to be about 4 percent for 2018.
“From what we hear by speaking with vendors, economists and others in the industry, the first half of ’19 is projected to be good,” Brent Nussbaum, chief executive of Nussbaum Transportation Services Inc., told Trucks.com. “No one wants to predict what is going to happen after that.”
That’s because there are so many unknowns that could affect the economy.
Threatened 25 percent tariffs on $200 billion in Chinese imports caused a bubble of goods to be shipped in the third and fourth quarters, while tariffs were 10 percent. Further Trump administration tariff increases are on hold for 90 days, leaving truckers in limbo as to what volumes will arrive in West Coast ports.
U.S. economic growth in 2019 is expected to be around 3 percent. That would be strong enough for motor carriers to follow through with purchases of record orders of new trucks and trailers placed in 2018. But if the economy slows in the first half, a significant portion of those equipment orders could be canceled in midyear, Ake said.
“Fleets have to make their operations more efficient and keep their tractors moving,” he said. “One way to do this is to use more trailers.”
The global economy, the recent steep drop in stock prices and the Federal Reserve’s intent to raise interest rates two times this year all create uncertainty, Nussbaum said.
“Longer term, I expect the second quarter to provide a strong uptick, as infrastructure projects proceed,” said Mark Montague, a DAT Solutions analyst.
Factors such as oil and gas exploration and production, home construction, and the rebuilding of thousands of homes destroyed by hurricanes in the southeast and wildfires in California should boost freight demand.
Through November, the total freight hauled by for-hire truck drivers was 7.2 percent above the first 11 months of 2017, according to the American Trucking Associations.
“With continued strength in November, tonnage growth is on pace to be the best year since 1998,” said Bob Costello, ATA chief economist.
Trucks hauled 10.77 billion tons of freight in 2017. Motor carriers collected $700.1 billion, or 79.3 percent of total revenue earned by all forms of transportation, the ATA said.