In recent years, the trucking industry has, undoubtedly, had to tighten its collective belt against the dropping freight rates and dwindling demand. Beset, seemingly on all sides, between regulations and legislation, it didn’t seem as though there was an end in sight.
Seemingly on all sides, between regulations and legislation, it didn’t seem as though there was an end in sight.
While there is still a good bit of conflicting data circulating about, making it hard to pinpoint a precise figure, it would seem that a rebound in both demand and pricing is finally starting to make its way to the surface.
Nowhere to go but Up
October proved to be a rather grim month as demand, pricing, and tonnage continued to drop. However, the rate of decline seems to finally be slowing down. It’s more of a trickle as a opposed to a sheer drop, which would suggest that the trucking industry has finally hit the bottom.
It’s more of a trickle as a opposed to a sheer drop.
Still, even with the slowdown in the decline, prices are holding steadily in the favor of shippers, as opposed to the carriers with rates declining for its eighth straight month during a softer than usual demand given the normally busy holiday season just around the corner. According to data from CIS and the ATA, both shippers and carriers are expecting little to no growth for the time being, as industry players debate as to whether or not they’ve actually hit the bottom, or merely another stumbling point on the way down.
Too Many Variables
The holiday season being one of the biggest contributors to growth in the sector isn’t having quite the desired effect for the trucking industry as hoped. According to Bob Costello, the ATA’s chief economist, normal seasonal trends simply aren’t holding for 2016, and with the changes to the norm, it makes it hard to track any real trend in truck tonnage. Simply put, there’s too much fluctuation, both up and down to get a clear picture. For example, the ATA’s stats on For-Hire Truck Tonnage Index fell 0.9% in October for year-over-year, but was actually up 2.5 year to date over the 2015 stats.
It’s that sort of widely variable data that is making it difficult, if not impossible, for industry trackers like Costello, to create an accurate prediction as to when the market will finally change to a more favorable direction, or just how favorable the change will be.
“The bottom of the current tonnage cycle should be near,” Costello said in a statement. “There are some recent trends that suggest truck freight should improve, albeit gradually, soon.”
“Retail sales, housing starts, and even factory output all improved in October, which is a good sign. Most importantly, there has been considerable progress made in clearing out excess stocks throughout the supply chain. While that correction is still ongoing, there has been enough improvement that the negative drag on tonnage shouldn’t be as large going forward,” he said.
A Slow Go
Whether or not the trucking industry has hit rock bottom is still up for some debate as logistics leaders quibble over some of the finer points of data. However, if the industry hasn’t hit bottom yet, it’s not far from it. As in all things, once you hit the bottom, there’s nowhere to go but up, which is a welcome light at the end of the tunnel for trucking companies. Fortunately, there are some signs that growth is just around the corner. Factory activity in the U.S. climbed during the month of October, meaning that manufacturing might finally be leveling out after its own difficulties. The Institute for Supply management followed this up by saying it’s purchasing managers’ index rose .4 from September to October, which is just starting to peak over a contraction rating.
Additionally, while indices for new orders are dropping, both production rates and employment are on the rise which are both typically good signs of life for the economy. All told, it’s still too early to tell whether or not these flickers of life will catch and start a new wind for the trucking industry, but as it stands, any improvement will be a welcome change.