Shippers’ demand for trucks may bounce back this year according to a Bank of America.
Demand for Goods and Services Remains High In Florida
Henry Queen | Reporter, Tampa Bay Business Journal
January 27, 2023
If 2021 was the year that companies generally regretted not having enough inventory, then 2022 was the year they regretted having too much. What will 2023 bring for the economy of durable goods?
“I expect [piled-up inventories] to continue, but I do think demand will pick back up,” BlueGrace Logistics Chief Strategy Officer Mike Meier said.
Logistics companies have a unique pulse on the state of the economy, and the Tampa Bay metropolitan area appears to punch above its weight in the trucking and warehousing sector. In Polk County, for instance, the amount of transportation and warehousing jobs increased over 130% in the past 20 years as the population grows and companies leverage the Interstate 4 corridor.
Locally, the three largest private logistics companies are Lakeland-based Saddle Creek Logistics Services, Riverview-based BlueGrace Logistics and Tampa-based ReedTMS Logistics, according to Tampa Bay Business Journal research.
When trucking giant Werner Enterprises (NASDAQ: WERN) acquired ReedTMS for over $112 million in November, its president and CEO Derek Leathers said the terms of the deal reflected the overall negative trends in the market.
Spot rates, or the fees shippers pay to move a truckload, had hit a low in November. They have since increased 20% but are still 33% below all-time highs from about a year ago, according to the FreightWaves National Truckload Index.
Meier, who studies industry trends for BlueGrace, said demand “hasn’t fallen off the cliff yet.” If a recession occurs, he hopes it will be short.
More generally, the economy in Florida looks strong. Employment is up about 5% over pre-pandemic levels, well above the national average. Between 2019 and 2020, Florida received four times the number of high-earning individuals compared to Texas.
Tampa Bay ranked the highest among all Florida metro areas in job growth (5.1%) between November 2021 and November 2022, according to the Bureau of Labor Statistics. Transportation and utility employment here increased over 7% in that same time frame, the highest among all sectors except hospitality.
Consumer spending and gross domestic product are also strong in Florida, but a decline in house prices may be a concern going forward, according to a Florida Chamber of Commerce presentation earlier this month. Interest rates continue to rise, and the majority of midsize businesses expect a recession this year.
Still, the chamber maintains confidence in the economy as it works to make Florida the 10th largest economy in the world by 2030.
Florida Chamber Chief Economist Ben Tabatabaei said he doesn’t see Florida entering a recession, generally defined as when the GDP slumps two quarters in a row. He said the federal government’s energy policies have had a negative impact on the nation.
“Once the cost of energy increases, the cost of transportation increases,” Tabatabaei said in an interview. “And once the cost of transportation increases, the costs of goods increase.”
Within the logistics industry, others have expressed cautious optimism. In an earnings call, J.B. Hunt Transport Services (NASDAQ: JBHT) pinpointed the second quarter of this year as when demand could rebound. Bank of America reported last week that it is now more bullish on “select” truck carriers. Leasing demand for logistics space also remains strong, according to real estate investment firm Prologis.