FTR: Capacity to remain tight, driver shortage to worsen

During a presentation at Commercial Carrier Journal’s Fall Symposium in Scottsdale, Ariz., Eric Starks, president of FTR Associates, told attendees that although the trucking industry is in a growth period, carriers need to keep an eye on the global economy and its potential impact on freight demand.

In the short term, Starks projects the economy to remain on a slow-growth track, but the long-term outlook poses some significant downside risks, including uncertainty in the European market, a potential slowdown in the Chinese economy and slow U.S. GDP growth.

FTR anticipates an average GDP growth at an average of 2.5 percent over the next six quarters. “We are less pessimistic than we were just several months ago, but there is still a lot of uncertainty in the market,” says Starks.

One positive indicator for the trucking industry is historically low inventory-to-sales ratios. “As the economy starts to heat up and manufacturers begin ordering more goods, we’re sitting in a good spot relative to the inventory situation,” says Starks.

While customer orders for Class 8 power units softened in the last few months, FTR is predicting orders to begin to rise. As peak shipping season hits, carriers are starting to place orders for next year, and Starks expects that to continue in November and December.

Potential changes to the hours-of-service rules, including the possibility that drive time will be reduced from 11 hours to 10 hours, will magnify the impact of the current driver shortage. “More drivers will be needed, and lower productivity will require more equipment to move the same amount of freight,” says Starks. While current levels are uncomfortably tight, FRT’s forecast is for the driver shortage to be much worse than what the industry experienced in 2004 and 2005.

The outlook for freight remains positive, growing at a rate of 2.5 to 4 percent over the next several years. Freight capacity is tight with roughly 95 percent utilization and could be driven higher with the implementation of changes to hours of service. “From a rate standpoint, fleets over the last several years have pricing power and have finally figured out how to take that power and make it work to their advantage,” says Starks.