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Top Trucking Economist Predicts Improved Year in 2017
January 24, 2017
Low unemployment rates, steady manufacturing and increased home construction will contribute to improved freight levels within the trucking industry for the year ahead.
“2017 will be a better year than 2016,” said Bob Costello, senior vice president and chief economist at the American Trucking Associations. Costello shared his insight on the economic factors affecting the trucking industry during a keynote address at The NATSO Show 2017.
“Statistically we’re due for a recession, but what you really need in a recession is something to get out of whack,” Costello said. “What out there today is overheated? Nothing that throws up alarms.”
Costello said the job market is solid and the unemployment rate is 4.7 percent, which can make it harder for companies to fill positions and will ultimately lead to increased wages. “The all-time low is 4.6 percent. We’re getting pretty close to full employment,” he said.
As a result of increased wages, consumers have more money to spend. “We’re a society of consumers. The more money coming in, the more we’re going to have going out,” he said, adding that the additional spending results in goods in trailers. “The consumer has been the pillar of this economy and will remain that way.”
New home construction is also strong, which adds to freight levels. “Last year we built just under 1.2 million new homes. That should increase to over 1.2 million this year despite the fact the Federal Reserve will push interest rates up,” Costello said.
In addition to driving construction-related freight, home construction also results in increase purchases of furniture and appliances.
Manufacturing is moving in the right direction as well even though factory output has been soft. “I’m not going to suggest manufacturing is going to go gangbusters, but we could go from no growth to a little bit of growth,” he said.
Costello said he expects fleets to take a productivity hit once the electronic logging mandate takes effect. “I anticipate capacity getting tighter,” he said.
However, he added that if productivity goes down, each of those individual trucks may buy less and use less fuel, but fleets will need more trucks to haul the same amount of freight.
The average length of haul in the dry van sector has dropped 33 percent since 2000, Costello said. Today the average is 533 miles. “Since 2000 we started buying online. Bricks and mortars have had to adjust to that,” he said, adding that online sales have increased nearly 500 percent since 1995. “They have built more distribution centers around the country. They’ve gone from a handful to dozens but they’ve gotten closer to the source.”
Driver turnover rates in the truckload space remain elevated, averaging 86 percent. The rate for the less-than-truckload industry is much lower at 10 percent.
Photo credit: Brittany Palmer/NATSO
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