This year has been challenging for the American trucking industry. A shortage of demand and drivers combined with several other factors hurting the trucking industry, 2016 has delivered some of the worst industry conditions in years. Analysts predict a more positive 2017 among the obstacles the field is facing.
Why the American Trucking Industry is Struggling
There is a disconnect between supply and demand. With excess stock and inventory, the demand for freight has declined. Economic activity has been slow, and working out the excess inventory has negatively impacted the freight market, according to John Blodgett, vice president of sales and marketing of MacKay & Co. All indications point to a positive economy by the middle of 2017, said Blodgett.
Until the second half of 2017, though, there are no signs of a break in this yearlong funk that truckers have faced, according to analysts for Stifel Transportation and Logistics Research Group.
Take JB Hunt Transport Services, for example. The company’s second-quarter report for operating income dropped 9 percent compared to the same time frame last year. The rate-per-load revenue dropped 5 percent. The company had increased their fleet size, but ended up having to charge lower rates to stay competitive. Other issues facing the company include increased driver cost, increased maintenance for the expanded fleet, and rising independent contractor expenses.
A Cass Freight Index Report showed that shipping volume was down 6 percent in May, confirming the low economic activity in the first half of the year. The report also stated that tonnage has dropped for transportation industries across the board, including rail and trucking.
Truck manufacturers are also facing challenges due to a decline in freight demand and a prior increase of many company fleets. This will translate into a market with many big rigs and transfer dump trucks for sale at slashed prices.
Trucking State of Industry Address
The new chief for the American Trucking Associations (ATA), Chris Spear, delivered the state of the industry address for trucking in October. He expressed many concerns for the industry about tax reform, trade agreements, excessive regulation, and infrastructure funding, according to Trucks.com staff writer, Clarissa Hawes.
Spear indicated that the many new rules and regulations for truckers are hurting the industry. He said the policies are acting like a disease, and breaking down the industry’s efficiency to move freight seamlessly across the country.
He was critical of politicians imposing new regulations on an already heavily-regulated and taxed industry. Spear said that America’s infrastructure and public funding is being suffocated by idealists that never see the outside of their cubicles.
A Positive Outlook for 2017
Industry conditions are expected to improve next year due to predicted consumer spending and manufacturing. This will cause the gap between supply and demand to shrink. With retailers embracing the quick in-and-out culture of e-commerce, the industry can expect more calls for delivering freight. A weaker U.S. dollar and post-election stability is likely to cause a surge in consumer activity.
Some leaders in the industry remain skeptical after the 2016 slump, but some leaders like co-chief executive of Swift Transportation, Richard Stocking, are thinking positively. He has high hopes for the 2016 peak holiday season, and that it will push the industry into a more profitable 2017.