Trucking Forecast: Clearly Costly

I’ve got good news and bad news. Okay, here’s the good news first. If you’re a trucker, you should have a pretty good year in 2012, with steady if slow freight demand from U.S. manufacturers and pricing power from tight capacity.

The bad news, your costs will keep rising, and drivers will be hard to find. If you’re a shipper, well, the good news is a bit harder to find. Over the next few years, you’re likely to face transportation rate hikes unlike any you’ve experienced.

Shippers accustomed to seeing transportation costs drop year by year over decades are in for a sharp shock thanks to structural constraints on truck capacity that won’t be removed anytime soon — even if truckers would like to remove some of them.

I can offer shippers a glimpse of good news — there are things you can do to absorb the shock and reduce costs, especially mode shifting and managing transportation and supply chains more “holistically.” But that means change, and change is hard.

Those are some of the takeaways gleaned from moderating the Forecast for Trucking in 2012 Webcast this afternoon — the first of four transportation industry forecasts The Journal of Commerce will present live and online this month.

Next up is the intermodal rail forecast on Jan. 19, followed by the third-party logistics forecast Jan. 24 and the ocean container shipping forecast Jan. 31.

Industry experts Noël Perry of Transport Fundamentals and Benjamin J. Hartford of Robert W. Baird gave more than 150 online participants a broad overview of the economy, trucking’s place in it, and where we’re headed in 2012 and beyond.

They started with good news: The U.S. economy really is improving, although at a slower pace and a lower curve than we enjoyed in many previous recoveries. Now for some even better news: Trucking continues to outperform the general economy.

“We are no longer trailing GDP growth, we are actually exceeding it,” Perry said. Politicians and economists concerned with the overall performance of the U.S. economy may be depressed, but “the good news is we don’t have to be.”

Compared with previous recoveries, the economic upturn since 2009 is proving rather “normal,” he said, following a course not too different from the recovery from the 2001-2003 downturn. “They are almost exactly the same,” Perry said.

Hartford also sees the economy improving, despite headwinds. Looking back over the last half century, he said, we appear to be near the end of a cyclical period of low growth in the S&P 500 stock index similar to the 1970s (but without the plaid).

The bad news: Economic swings are becoming more volatile, with less time between the peaks and troughs of boom and bust, said Perry. Rising federal debt could push the U.S. economy back into recession within a few years, he warned.

“That means the necessity to balance (trucking) capacity against (freight) demand is much more important in the teens than in the ‘aughts,’ and particularly than in the ’90s,” Perry said. The days of abundant and “free” capacity are long gone.

Hartford and Perry see U.S. manufacturing generating more freight demand for trucking and rail in 2012. “There’s still industrial pent-up demand,” said Hartford. “We’re still 8 percent below the industrial production peak we saw in August 2007.”

I’ll dig deeper into their forecast in my next blog post, getting into the structural constraints on trucking capacity they see affecting rates in the next year and for years to come — particularly the long-simmering truck driver problem.

If you want to listen to the entire webcast or download slides from the Perry and Hartford presentations, they should be available online within 24 to 48 hours. Just go to www.joc.com/webcasts or e-mail Mina Patel at webcasts@joc.com.

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

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