Smaller shippers are showing more confidence in the U.S. economy, likely spurred by rising consumer spending and income and reports that real gross domestic product increased 0.4 percent in the fourth quarter rather than declined.
In a survey sponsored by trucking company Saia, more than 700 executives at small to medium-sized businesses gauged the state of the economy, the biggest business challenges they face and where they will spend transportation dollars in 2013.
Most of those smaller shippers saw the U.S. economy growing, which will help bring in orders that in turn fill the trailers of less-than-truckload carriers such as Saia. Fifty-six percent said the economy is improving “somewhat” or strongly.
That compares with 35 percent who saw moderate to strong economic improvement in the year-ago Saia National Small to Medium-Sized Business survey, which has become a yardstick of economic sentiment among smaller shippers. The largest percentage of shippers, 32 percent said the third quarter would likely be their strongest, followed by the fourth quarter, at 30 percent.
Those spring shoots of optimism bode well for LTL carriers and other trucking companies but especially for Saia, which reported strong increases in revenue and profit in 2012, despite an economic recovery that was weak at best for most of the year.
Still, only 7 percent of the executives saw the economy recovering strongly in 2013, and nearly half said the economy would grow slightly, Saia said in its survey analysis. The mood among the majority, Saia said, was “cautious optimism.”
“Small to medium-sized businesses indicate they see some improvement in the economy, but continue to be wary of excess spending or hiring,” Sally Buchholz, Saia's vice president of customer service and marketing, said in a statement.
Signs that the economy is improving, and improved more than originally thought in the fourth quarter, are mounting, including the 0.5 percent increase in estimated real GDP in the fourth quarter from a 0.1 percent decline to an 0.4 percent gain.
That improvement in GDP was based largely on personal consumption expenditures, which increased 1.8 percent in the fourth quarter, compared with 1.6 percent in the third quarter, according to the U.S. Bureau of Economic Analysis.
GDP was hit in the fourth quarter by a sharp reduction in spending on private inventories, which dropped from $60 billion in the third quarter to $13 billion in the fourth quarter, as that buildup of goods hit the road, boosting truck tonnage.
That tonnage continued to climb in the early 2013. The American Trucking Associations For-Hire Truck Tonnage Index climbed 0.6 percent month-to-month in February and 1 percent in January. Tonnage has increased for four straight months.
Old Dominion Freight Line, a $1.9 billion LTL carrier, now expects tonnage to rise 4.5 to 5 percent year-over-year in the first quarter, higher than its original estimate. The carrier also sees pricing rising, pushing up yield 2.5 to 3 percent in the quarter.
Saia, a $1.1 billion carrier and the 10th-largest U.S. LTL trucker, according to SJ Consulting Group data, hasn’t released first quarter projections. However, the St. John, Ga.-based carrier’s revenue rose 4.5 percent in the fourth quarter.
LTL tonnage increase 3.2 percent in the quarter and LTL yield or revenue per hundredweight rose 6 percent, including fuel surcharge revenue, Saia said. Those additional shipments and higher rates and surcharges lifted Saia’s bottom line.
The motor carrier’s operating and net profit soared in the fourth quarter, with the first rising 63 percent to $10.1 million and the second soaring 119 percent to $5.4 million. For the full year, Saia’s net profit rose 182 percent to $32.1 million.
That was the greatest year-over-year increase in profitability among the publicly owned LTL carriers in Saia’s peer group — companies with more than $1 billion in annual revenue. YRC Worldwide’s regional group was second at 112 percent.
Saia hopes to build on that success in 2013, as 42 percent of the small shippers the carrier surveyed in January said they plan to increase spending on LTL, 33 percent on expedited trucking and 20 percent on guaranteed service this year.
And while speed measured in reduced transit times continues to be important to shippers, on-time delivery — in other words, reliability — was the metric that 84 percent of the executives surveyed told Saia was most important to them.
The shippers ranked their biggest challenge as the economy, 59 percent, followed by increased costs of running a business, 33 percent, changing regulations, 19 percent, health care costs, 16 percent, and finding qualified employees, 11 percent.