Truck tonnage rose for the second consecutive month in May, as improving economic conditions and gains in hiring have helped trucking performance
The American Trucking Associations (ATA) reported that truck tonnage rose 0.7% in May from April’s levels on a seasonally-adjusted basis. This comes on the heels of an upwardly-revised 2.7% increase in the previous month as the trucking industry continues to improve in the 2nd quarter. Despite the solid gains during the month, year-over-year growth fell to 7.8% in May, driven by difficult comparisons to last year. This trend of moderating year-over-year growth is likely to continue in the second half of the year, as tonnage results will face even tougher comparisons in the 3rd and 4th quarter.
Truck tonnage is often seen as a bellwether of the general health in the economy. Trucks carry approximately 70% of all domestic freight in the US economy, moving manufacturing, wholesale, and retail goods to their next destination. Historically, truck tonnage has had fairly close ties to broad economic indicators such as total industrial production, retail sales, and GDP, and improvements in tonnage are consistent with the general theme of an improving economy in the 2nd quarter
The ATA’s Chief Economist Bob Costello noted: “This continues to be one of the best, if not the best, truck freight markets we have ever seen. May’s increases…not only exhibit a robust freight market, but what is likely to be a very strong GDP reading for the second quarter.”
Expanding capacity remains key going forward
With growth conditions in the economy looking solid for the remainder of the year, the fundamentals for healthy tonnage growth will likely be in place going forward. However, with existing demand already keeping trucking capacity tight, the industry will need to continue to make strides in attracting and retaining drivers to expand the amount of tonnage it can haul throughout the economy.
There is some evidence that this is already taking place. Carriers have increasingly reported offering higher wages, larger signing bonuses, and improved benefits in an attempt to woo potential workers. In response, trucking hires have made noticeable improvements throughout the course of the year, increasing in eight of the last nine months.
Even with the improved gains in employment, however, trucking capacity remains a central issue. Survey data suggests that the scarcity of available drivers has helped create backlogs in American factories, as supplier delays and challenges in finding trucks to deliver manufactured products have left manufacturers unable to meet existing demand.
This would suggest that, despite how robust tonnage growth has been throughout the past year, performance is actually being restrained by the capacity constraints facing the industry. While recent results suggest that capacity is slowly coming back to the market, more needs to be done in order to meet all of the potential demand in the economy.
Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.
