Trucking kept pace and occasionally moved ahead of a slowing economy in the second quarter, with the largest publicly owned trucking companies improving their profitability despite freight volumes that fell or grew more slowly. Truck pricing stayed the course, rising in the low-single-percentage-point range for the most part — less of an increase than many carriers had expected earlier in the year.
Truck capacity, particularly in the truckload sector, achieved “a tenuous equilibrium” as declining demand remained slightly above capacity levels.
Most trucking metrics reflected an economy that expanded only 1.5 percent from the first quarter, when gross domestic product rose 2 percent — in other words, slow growth, but not “no growth” or recession. Comparisons also became tougher for carriers that grew at a faster pace year-over-year in 2011 from a cold start in 2010.
Overall, second quarter shipping volume as measured by the seasonally adjusted American Trucking Associations For-Hire Truck Tonnage Index rose between 3.2 and 4.1 percent from a year earlier, but contracted on a monthly sequential basis in April and May before rising a modest 1.2 percent in June.
For the quarter, the ATA tonnage index declined 0.8 percent from the first quarter, the first such decrease in a year. ATA Chief Economist Bob Costello lowered his tonnage growth forecast for 2012 to 3 to 3.5 percent because of recent “economic weakness.” By comparison, truck tonnage increased 5.8 percent in 2011. “The lower year-over-year gain fits with an economy that has slowed,” he said.
Net orders for new Class 8 trucks plunged about 18 percent from March over the course of the quarter, according to data from FTR Associates, as trucking operators unsure about the economy put purchasing plans on hold. Equipment costs remained high, with the average price of used trucks rising above $50,000 in April.
Motor carriers also throttled back hiring plans, with trucking employment growing from 3 to 3.4 percent from April through June, compared with 3.2 to 4.1 percent in the first quarter of 2012 and 4.5 to 4.6 percent in the second quarter of 2011.
The Journal of Commerce Trucking Employment Index average reading for the quarter was 92.6, compared with 91.9 in the first quarter. The index averaged 85.9 in last year’s second quarter, indicating trucking employment rose almost 7 percent from a year earlier but less than 1 percent from the first quarter.
The JOC Truckload Capacity Index ticked up slightly in the second quarter, but only to its fourth quarter level of 84.4. That means available truck capacity at the truckload carriers monitored by the JOC is still at least 15 percent lower than its 2006 peak and was actually down 2.1 percent from a year earlier.
Tight capacity, in terms of trucks and drivers, helped carriers keep pressure on pricing, though gains came more slowly and modestly than in 2011. Year-over-year increases in yield, a measure of pricing and surcharges, were 2 and 7 percent for publicly owned less-than-truckload carriers. Many of those carriers implemented general rate increases as high as 6.9 percent in the third quarter.
Several truckload operators reported rate increases in the 2 to 4 percent range.
Lower second quarter fuel costs helped constrain rising expenses for carriers, with a 22-cent year-over-year gap in the national average diesel retail price opening by mid-June. Cost controls and pricing discipline were evident in the operating ratios of the largest LTL and truckload carriers, which underscored how much trucking companies were able to increase profitability despite slower growth. Saia improved the most among public LTL carriers, dropping its operating ratio in the quarter 4.3 percentage points from a year earlier to 92.6 percent. Old Dominion Freight Line had the lowest operating ratio of the public LTL carriers, 84.7 percent, down 1.8 points year-over-year.
Heartland Express had the best truckload operating ratio, though at 80.9 percent it was up 4.7 percentage points from a year earlier. Celadon had the best year-over-year improvement, dropping its operating ratio 3.7 percentage points to 87.2 percent.