Good News/Bad News on Shipping Rates for Truckload Freight

Good News/Bad News on Shipping Rates for Truckload Freight

msfcfreightimagelarge The good news is that shipping rates for truckload freight have gone up year to year. The bad news?  That growth is expected to remain below the rate of inflation.

One freight industry expert says a flat U.S. economy since last winter has translated to mostly flat lined shipping rates for trucking firms. The culprit?

Flagging retail sales.

“Everything we’re seeing just continues to suggest things are kind of sluggish,” said Eric Starks, president and CEO of the FTR freight intelligence forecasting firm. “One of the big problems we’re seeing is that inventories are just too high. That’s created a little bit of pushback from customers.

“So during the next six to nine months at a minimum, there needs to be some inventory correction.”

Unless more retail sales start happening, Starks said product makers and retail lines will likely begin to slow down their production.

FTR examines rates from truckload, LTL rates, railcar, and intermodal sectors, and said a glut of extra freight capacity combined with the lukewarm economy have kept annual rate projects to 1 percent.

“The big dog is the truckload market, and when we look at the truckload market those numbers have been going down or flattening out,” Starks said. “Truckload companies want to see rates going up at least to the level of what inflation is – which would be closer to 2, or 2.5 percent.”

While the economy seems to be flat, analysts aren’t seeing indications that things will get worse, Starks said.

FTR continues to examine leading market indicates like new home construction, unemployment, he said.

“With the overall economy, the question is – can it accelerate or is it likely to go into a recession,” Starks said. “Everything we’re seeing right now doesn’t suggest we’re going into a recession. There doesn’t seem to be any significant imbalances out there.”

Starks said analysts at his firm have debated about whether the cycle of an economy slowing, building up steam and growing will happen.

“That’s now the way the economy has to work,” he said.

While Christmas freight and the retailers who supply goods will determine much of the economic forecast in coming months, Starks said one key sector – businesses – will also have to play a part.

“Businesses are just not ordering right now,” Starks said. “They’re sitting on the sidelines. Businesses are clearly in a wait-and-see type of environment. We had started to see the job market waking a little bit.”

Trucking often shows signs of an uptick before other sectors.  Starks said economic downturns and boom periods can be seen in new truck equipment orders by large trucking companies and truck freight capacity tighten. Rate rises soon follow.

“It doesn’t necessarily always indicate exactly how the economy is going to behave, but if we see a downward slide in trucking – that almost has to happen before we see the economy drop,” Starks said. “Traditionally, if we haven’t seen the trucking market easing, you don’t see the economy easing. And the same is true for heading back up.”

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