Over the previous two years, the COVID-19 pandemic has both created new challenges and, in some cases, accelerated or exacerbated existing economic trends. In an increasingly complex supply chain, it’s imperative that trucking fleets stay ahead of the key macroeconomic trends that impact the industry.
As the chief economist & senior vice president of international trade policy and cross-border operations for the American Trucking Associations (ATA), Bob Costello oversees the ATA’s collection, analysis and dissemination of trucking economic information. Bob also conducts economic analyses of proposed regulations and legislation affecting the trucking industry.
In a webinar with Trimble in February, Costello shared that quarterly growth in the U.S. Gross Domestic Product (GDP) for 2021 was at “crazy” levels, with the final annual GDP increase at 5.7 percent – the best year since 1984.
Costello predicted that the three main drivers of truck freight – household consumption, construction and industrial activities – are likely to slow down in the coming months but will remain at overall high levels in 2022.
“Those indicators are generally going to remain at very high levels, which means that there’s going to be lots of freight out there,” Costello stated.
Here are some of the most noteworthy trends and issues affecting the trucking industry in the coming year that Costello shared:
Inflation & rising costs: Strong consumer demand, rising wages due to the labor shortage and supply chain challenges are leading to the rising prices of goods and higher interest rates. “When you pump trillions of dollars into an economy…it’s likely to lead to inflationary pressures,” Costello said. As of January 2022, the price of used cars and trucks, as well as fuel, was up about 40% from January 2021.
Unemployment rate: The rate of unemployed individuals across all industries is rebounding from an initial spike at the beginning of the pandemic in 2020, with approximately 11 million available job openings and around 6.5 million unemployed individuals. Higher employment rates generally lead to more spending, so this is a positive trend for trucking.
Contract vs. spot markets: The ATA’s data shows that for-hire truckload contract freight was down by several percentage points in 2020 and 2021, while the spot market is “surging,” with growth of more than 30% in 2020 and 2021, Costello said. The reason for this? Costello points to a lack of fleet capacity which is increasingly forcing them to turn to the spot market.
Driver shortage: At the current rate, Costello anticipates the driver shortage to reach 160,000 by 2030. To address this issue, he pointed to stronger recruitment efforts within underrepresented demographics such as women, as well as lifestyle adjustments such as increasing the availability of parking spots to increase drivers’ available hours. But, at the end of the day, “fleets alone are not going to solve this…this is an entire supply chain [issue],” Costello stressed.
Rise of LTL, final-mile and local hauling: With booming e-commerce demand comes booming less-than-truckload (LTL), local short-haul and final mile needs. Although there was a dip in LTL tonnage in 2020, it was up more than 7 percent in 2021: “LTL did nicely last year,” Costello said. These areas of the industry have also not been as strongly affected by the driver shortage, Costello said, because the more local routes allow drivers to be home more often, among other attractive benefits of the job.
Infrastructure investments: The impacts of the recently passed infrastructure bill are “going to be great,” Costello said. He said these funds have a “significant” ripple effect that is likely to generate a great deal of freight over the coming years as updates are made to outdated infrastructure across the country. However, he joked, “We’re going to have to have patience out on the roads as we see more road construction!”
Costello also covered many other trends and challenges the industry is facing, including the chip shortage, strength of the used equipment market, increasing driver pay and more.
While the trucking industry has experienced many positives over the past two years, in the long term, Costello said he has some concern for fleets if freight rates in the spot market were to fall.
“Freight was good during the pandemic – capacity is tight, and rates are higher, but costs have gone up, too,” Costello admits. “Luckily, a freight recession isn’t on the horizon. Things are going to be pretty good this year unless something really comes out of left field.”
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From rising inflation to the ongoing driver shortage, making yourself aware of these broader macroeconomic issues is an important step in ensuring your business keeps pace.
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