The current cycle of larger than normal inventories, coupled with weakness in the manufacturing sector, has contributed to soft trucking volumes in 2016, according to American Trucking Associations Chief Economist Bob Costello.
Bloated inventories and depressed activity in the U.S. manufacturing sector have weighed down trucking volumes so far in 2016, according to American Trucking Associations (ATA) Chief Economist Bob Costello.
“The current cycle of larger than normal inventories has taken longer than usual to resolve itself,” Costello said at ATA’s Management Conference & Exhibition. “Coupled with weakness in the manufacturing sector, we’ve seen softer than typical volumes in both the truckload and less-than-truckload sectors.”
It’s not all bad news though. Costello said he is “hopeful that we are nearing the bottom of this cycle and will soon expect a modest rebound.”
He noted that several truckload and less-than-truckload carriers increased capacity in 2015, making the current operating environment even more challenging.
“Also, truckload carriers have added trailer capacity of late, likely in advance of the approaching electronic logging device compliance deadline,” he said. “More small and medium fleets will, I believe, try to compensate for the impact of ELDs by doing more drop and hook to reduce wait times.”
Under federal hours-of-service regulations, commercial truck drivers are limited in the number of hours they can work and drive on a daily and weekly basis. A recent mandate from the U.S. Federal Motor Carrier Safety Administration (FMCSA) mandate requires truck drivers to use ELDs to track their driving and non-driving activities. ELDs automatically record driving time, engine hours, vehicle movement, miles driven and location information.
The FMCSA finalized the rule in December for all interstate commercial motor vehicles model year 2000 and newer, giving trucking companies two years to comply.
The Owner-Operator Independent Drivers Association (OOIDA), which represents about 157,000 small truckers, in March filed an appeal in federal court seeking to block the FMCSA from implementing the mandate, arguing the rule doesn’t advance safety, is “arbitrary and capricious,” and violates the 4th amendment right against unreasonable searches and seizures.
In addition, Costello noted that the value of cross-border trade carried by trucks between the U.S., Canada and Mexico has grown 168 percent since 1995 to $712 billion annually.
“It may not always be top of mind, but trade is an important part of the trucking economy,” he said. “In the post-North American Free Trade Agreement era, we’ve seen growth in exports moved by truck outstrip overall growth of domestic freight over the past two decades.”
“The economy has been running a relay race, with only one runner – the consumer – carrying the baton for too long,” added Diane Swonk, founder and CEO of DS Economics. “Next year, there will be more runners in the race to grab the baton, but they won’t be breaking any speed records.”
ATA: Bloated inventories, weak manufacturing weigh heavy on truck volumes
