Truckload Pricing Slips in April

The economy is not expanding yet, at least according to reports of a mere 0.1% GDP growth in the first quarter. Unemployment is drifting down, but a good portion of the “improvement” was in the denominator — people who stopped looking for work, retired or otherwise left the workforce. New job openings are not keeping up with population growth. In fact, they are only now beginning to replace the jobs lost in the recession that was supposed to have ended five years ago.

There is some question about the lasting impact of the economy’s lackluster performance on freight in the remaining months of 2014. John Larkin of Stifel Nicolaus describes the outlook as “mixed, with respect to…current tightness in supply and demand.” Larkin was quoted this week in Fleet Owner, predicting that current demand conditions may not offer carriers sufficient leverage to raise their rates. DAT sees collaborating evidence in some additional capacity coming back in April figures and many lanes have returned to 2013 levels.

Bad spring weather has also been slowing down the northern tier states and is the cause of less than robust demand in the van sector. Reefer season is mostly ‘on par’, while flatbed remains strong and looking to move stronger.

On the bright side, certain sectors are recovering, and those are generating some additional freight volume. Of the recent jobs, 32,000 were in construction. That bodes well for the flatbed sector, as well as van freight, to haul consumer goods that will be purchased by the newly employed and their families. In general, we’re also seeing high activity into and out of East Coast ports and Southeast demand is now picking up. Industrial construction and multifamily homes are strong areas, while single family home construction lags.

We also know from rail activity that the building blocks of the economy – energy, raw materials, chemicals, etc. are moving at about 3.8% higher so far in 2014 than in 2013. The rails are picking up the pace which means trucking should follow.

Taking that all into account, we may see a softer than usual May-June period, but July-August freight volumes could be extraordinary as the economy finally warms up, similar to last year, especially since Independence Day is on a Friday this year, which should be less disruptive.