When Will the Recession End for the Freight Industry?
Monday January 23, 2017
image courtesy Peoplease, 2017
2017? Maybe. If the recession does not end, by most accounts it will certainly improve this year. Triggered by the collapse of oil prices two years ago, our industry has been slow to recover.
The collapse has been due to lowered fuel prices, dwindling fracking, decreased carrier revenues, and falling line haul rates. To counterbalance this, Spot Freight has boosted the market in the last two months of 2016 due to E-Commerce.
With the new Trump Administration there are promises to relax current regulations, which will make it easier for Transportation to be arranged and purchased. We could see increased demand for freight transportation, especially trucking, because of the following:
- Proposed increased levels of infrastructure spending
- More investment with the suggested decreased taxes and repatriation of foreign earnings
Vice President Mike Pence addressed the U.S. Conference of Mayors on January 17, 2017 and explained, “We’re going to do an infrastructure bill, and it’s going to be big.” The Vice President added, “It’ll have the funding to help communities and states all across America meet the needs that face too many communities and often times stifle growth.”
This is great news considering that in 2013 the American Society of Civil Engineers gave the country’s infrastructure a D-Plus grade.
President Trump has announced to propose a bill within his first 100 days that would invest over $1 Trillion dollars in our infrastructure over the next ten years. While the details so far remain a little sketchy, there have been hints that suggest Public and private partnerships, or P3s. Private investors could be utilized to help the infrastructure projects come to fruition sooner and faster.
P3s have sometimes meant the use of toll roads, but proponents of this method of funding claim that it is indeed possible without the use of tolls. This is evident in the newly erected tunnel at the Port of Miami where both Private and Public money built the tunnel contingent on the promise that it would be toll free.
In addition, shippers are optimistic that there will be an increase in truck transportation, while intermodal will likely see a decrease. A recent survey from Averitt Express Inc. suggests that the percentage of shippers who anticipate an increase in shipping volumes in 2017 grew to 73% from only 68% one year ago. Although intermodal has made a recent recovery in shipping volumes, 2017 will likely see less shippers choosing intermodal for transporting their freight.
Also, by the end of 2017 at the latest, the use of ELDs will become mandatory. Perhaps a consequence of this new regulation is the recent slowdown in fleet additions by the largest carriers, and hence tighter truck capacity for 2017. If you do not have an ELD by now or in the next few months, shippers may not want you to ship their freight.
This “shortage” has already led to 3% in economic growth in the second half of 2016. Simple economics of supply and demand are a direct result of this weakened supply. In the coming months Spot freight should see an increased amount of action.
While our current economic climate makes it difficult to predict the future of our industry, the outlook is definitely more positive than it has been in a couple of years. Let’s make sure we are ready for the upcoming upswing!
Written by: Jennifer Dunn, Logistics Group International
References: Transport Topics, January 16, January 23, 2017
Back to All Posts