The second half of 2020 and the long-term impacts of the COVID-19 pandemic are unknowns, but one noted trucking economist is willing to predict the U.S. economy’s recovery will be more robust and occur more quickly than many might think.
“That’s not to say it’s going to be even,” said Donald Broughton, managing partner and principal with Broughton Capital, during his economic outlook session at CCJ‘s virtual Symposium Wednesday. “Some companies will explode, Amazon for example, and other companies will become the buggy whip manufacturer. The overall [recovery] is going to be extraordinarily dynamic, and as it happens it will be companies that use technology to create solutions that win.”
Reasons why Broughton is so bullish on the economy include low interest rates, low inflation and a continued return to domestic manufacturing. “Onshoring was already happening because technology eliminates labor,” said Broughton. “As China was losing manufacturing jobs to Vietnam and Bangladesh that offer even lower labor rates, we were bringing manufacturing jobs back because we could replace those labor costs with technology and do it more efficiently.”
The trucking industry’s transition to electronic logging devices also will have a major impact on productivity and efficiency for carriers going forward.
“After the ELD learning curve, the industry actually increased capacity, not decreased capacity. It improved everyone’s utilization,” said Broughton. “As a result, that capacity was out there and demand was holding up,” he added, referring to 2019 and the beginning of 2020.
Broughton also noted that shortening supply chains will create new freight opportunities in the freight market as consumers demand speed, predictability and reliability. The amount of the supply chain that is less than 50 or 100 miles is going to increase in volume even more.
“Last-mile fulfillment is going to explode at a rate that is only going to be held back or contained by infrastructure capacity in warehousing, trailers and small delivery trucks,” said Broughton.
“Domestic ton miles will grow at an outsized pace for most modes,” he added, noting, “Transportation companies that can rise to the challenge have the opportunity to not only grow their top line but improve their operating margins.”
Broughton’s presentation, COVID-19: The Insider Take on Transportation Disruption, will be available for download next week at the following link: www.ccjsymposium.com/downloads.