A Rolling Recovery

The U.S. economy sometimes seems stuck in a seesaw recovery. As soon as job numbers or retail sales improve, fuel prices rise or durable goods orders decline, raising questions about the strength of the recovery and bringing last year’s “soft patch” to mind.

For perspective on just how solid the economic recovery may be and how far we’ve come since the recession ended in 2009, look to the less-than-truckload freight haulers profiled in this week’s Top 25 LTL Carriers special report on page 30.

Those trucking companies primarily haul palletized freight in small lots (but high volumes) for retailers and manufacturers of all types. When the economy crashed in 2009, their revenue plunged nearly 25 percent in one year — a historic collapse.

Their steady recovery since then reflects a long-term strengthening of U.S. manufacturing, exports and consumer demand evident in freight shipments and freight revenue but often obscured in other indicators from month to month.

In 2011, the 25 largest LTL trucking companies posted their biggest gain in sales since 2005, the height of the last economic cycle in trucking. Revenue for the group rose 12 percent to $27.6 billion in 2011, accelerating from a 9.2 percent increase in 2010 that brought LTL revenue from a $22.6 billion low point to $24.7 billion.

The revenue gain for the 10 LTL carriers with more than $1 billion in revenue was even more dramatic: 17 percent year-over-year to $22.2 billion. Cumulatively, those companies represent 73 percent of the $31 billion LTL market.

Every company on the Top 25 LTL Carriers list increased revenue last year, including the operating companies of long-troubled YRC Worldwide. According to SJ Consulting’s estimates, YRC Freight increased revenue 11.6 percent last year, matching the industry average.

Chief competitors FedEx Freight, the largest LTL carrier, and Con-way Freight increased revenue 6.5 and 5.6 percent, respectively. Old Dominion Freight Line punched LTL sales up 25.7 percent last year to $1.7 billion, according to SJ Consulting’s estimates (which are based on LTL revenue, not total revenue, which in ODFL’s case increased 27 percent to $1.9 billion).

Higher volume drove those improvements. ODFL reported a 9.8 percent year-over-year gain in shipments in the fourth quarter, while YRC Freight increased shipments per day 6 percent. Even Con-way Freight, which spent more than a year culling low-priced freight from its network, increased tonnage nearly 1 percent.

Some caveats: Although trucking activity may point to the route the economy will eventually take, it’s still an indirect indicator. Trucking doesn’t generate real economic value, the production and sale of goods hauled by trucks does.

The increase in LTL revenue also must be attributed in part to higher prices and fuel surcharges, not shipments alone. But back-to-back years of steady improvement for LTL trucking suggest the economic recovery may not be as fragile as we fear.

The trucking data also reveal something of the limits of the recovery. Total LTL revenue is still 8 percent short of the $33.3 billion carriers hauled in 2008. That’s a destination truckers and shippers can drive toward in 2012.

Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter @wbcassidy_joc.

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