Survey: Trucking business conditions improved in May

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Updated Jun 24, 2013

Business conditions in May were for the most part better than they were in April, according to the latest Randall-Reilly MarketPulse survey of trucking conditions. Nearly 40 percent of the MarketPulse panel of for-hire trucking executives reported that conditions were better, and only about 9 percent said business was worse. Meanwhile, driver availability remained the top worry among the largest number of carriers, although the pending changes to the hours-of-service regulations are beginning to register as a concern.

Larger carriers – those with more than 100 power units – were more positive regarding May business conditions than smaller ones. That’s in keeping with a second indicator from the survey, an index that assesses executives’ perception of the month overall on a 1 to 10 scale with 1 being the carrier’s worse month ever and 10 being its best. This index rebounded to 6.45 from 6.22 in April even though it actually declined among smaller carriers.

“The results from the May MarketPulse survey largely square with the economic indicators we have seen for May,” says Avery Vise, executive director for trucking research and analysis for Randall-Reilly, which publishes CCJ. The good news in May included a 6.8% jump in housing starts, higher retail sales, 175,000 new jobs and the American Trucking Associations for-hire truck tonnage hitting an all-time high, Vise says.

Given the strength of the ATA index, the expectation might be for even more positive results from the MarketPulse survey, but as ATA Chief Economist Bob Costello points out, much of the growth in tonnage is from particularly heavy freight, such as housing construction materials and sand and water needed for hydraulic fracturing. The growth in loads hasn’t kept pace with tonnage.

One weak spot in May indicators was a contraction on the Institute for Supply Management’s manufacturing activity index for the first time since November. But the PMI is a leading indicator for trucking activity; May’s freight volume relates more to the ISM figures for February through April, which were relatively strong. Another concern is that the inventories-to-sales ratio ticked a bit higher in April. If that trend were to continue, the industry could see a slowing of freight shipments as the supply chain strives to achieve balance, Vise says. “Taken together, the PMI and inventories-to-sales ratio suggest challenges for near-term freight growth.”

Looking ahead, carriers largely appear optimistic. More than 60 percent of carriers in the MarketPulse survey expect business conditions to be better in six months, adjusting for seasonality. Only about 3 percent expect business to be worse. Here there was little difference on the outlook between larger and smaller carriers. But plans for the fleet differed greatly. Overall, about 44 percent plan to replace aging equipment without changing fleet size over the next six months. Another 38 percent plan to grow their fleets. But 43 percent of larger carriers planned growth compared to only 27 percent of smaller carriers.

Although driver availability remained the top concern of both larger and smaller carriers, the upcoming hours-of-service rule changes were much on the minds of smaller carriers in particular. Regulation was the top concern of more than 26 percent of the smaller carriers, approaching driver availability, which was the top concern of about 35 percent of smaller carriers. As a comparison, 56 percent of larger carriers reported that driver availability was their top concern while only 7 percent identified regulation as the No. 1 worry.

Selected quotes from the MarketPulse survey
“Our business has spiked upward, but we are still cautious and will remain so.”

“Should continue to see improvements as long as we can get by with changes coming on July 1. Hopefully, customers will finally run out of cheap haulers and allow some increases.”

“Shippers are still in the driver seat as far as rates and truck availability. Sure would like to see a bunch of carriers who haul for nothing and who put nothing back into their safety budget be put out of business.”

“Given the proliferation of recent RFQs lately, it seems shippers are expecting another round of rate reductions. Well, we have been through that phase and you cannot reduce rates and attract and retain drivers. The carriers with the drivers in seats will be successful, and that does not equal low freight rates.”

“The freight market just continues to take two steps forward, one step back. Feeling very much like it could be a long slow death to mid-sized and smaller carriers trying to cover lack of drivers, increased costs across the board (mostly due to regulations) while the rates are a push at this point.”

“With more regulations coming down the pike I’m seriously looking at short-term solutions to get out of transportation.”

The Randall-Reilly MarketPulse survey canvasses a standing panel of senior for-hire trucking executives each month, allowing for a reliable directional assessment of industry conditions despite a relatively small sample of around 100 respondents. The May 2013 MarketPulse report is available at no additional cost to subscribers of Randall-Reilly’s TruckGauge by clicking here or for $95 at www.rrmarketpulse.com.