On the economic front, it's pretty good news overall for the trucking industry in the U.S., according to Bob Costello, chief economist and vice president of the American Trucking Associations (ATA), speaking at the Commercial Tire Executive Summit during the Tire Industry Association World Tire Expo in Louisville.
But increasing costs-particularly for fuel, new trucks and insurance-are mitigating what otherwise would be something of a boom, Mr. Costello told his audience April 20.
``We no longer have the luxury of not dealing with the cost side,'' he said. The trucking industry, he noted, spent $10 billion more on diesel fuel alone in 2004 vs. 2003, and that cost will be billions more in 2005. When the new ultra-low-sulfur diesel fuel becomes the standard in 2005, it will drive prices up even further.
The overall economic picture is favorable for truckers, he said. The Gross Domestic Product grew a strong 4.4 percent in 2004, and while the GDP growth won't match that in the foreseeable future, it should still increase by a more-than-acceptable 3 to 3.5 percent in 2005 and then 3.3 percent annually through 2016.
Consumer spending, which grew 3.3 percent in 2004, should slow to 2.5 to 3 percent in 2005, Mr. Costello said. Manufacturing grew 4.8 percent in 2004-a very significant number for the trucking industry, which hauls whatever manufactured goods are made-and should grow at least that much in 2005, thanks to the weak dollar driving overseas exports, he added.
``Inflation should stay fairly mild, despite oil prices, meaning that the Federal Reserve won't be real aggressive on interest rates,'' Mr. Costello said.
While rail intermodal and air freight shipments will grow in tonnage at twice the rate as trucking over the next few years, he added, together they account for barely 2 percent of the freight carried every year. With 68 percent of the domestic tonnage in 2004 and a projected 69 percent in 2010, trucking will continue to dominate the freight market, he said.
The success of the industry comes with some inherent problems, Mr. Costello said. To replace a glut of old trucks in their fleets-and also faced with external factors, such as new emissions regulations from the Environmental Protection Agency-truckers have been buying replacement trucks in large numbers.
He stressed that the new trucks being purchased now are replacements, not additional trucks for fleets. ``Some capacity is being added, but not enough to meet demand.''
Capacity is tight, but the constraints on increasing it are growing, as are the barriers to entering the trucking market, according to Mr. Costello. The cost of fuel is one barrier, the cost of insurance another. ``Good luck getting it, let alone paying for it,'' he said.
But perhaps the worst problem is financing: ``There are tales of truckers leaving rigs by the side of the road because they couldn't afford to pay for them,'' he said.
Shippers are noticing the shortfall in capacity. Quoting from an ATA survey from the fourth quarter of 2004, he said the results indicated that 89 percent of shippers think capacity in the trucking industry is either ``extremely tight'' or ``tight.''
Probably the greatest dilemma the industry faces in this regard is the supply of drivers. Driver wages comprise the largest cost for truck fleets, Mr. Costello noted, yet an acute driver shortage and slow growth in the labor force demand that truck fleets pay drivers higher wages.
Mr. Costello displayed an ATA survey, showing that driver turnover in 2004's fourth quarter was an astounding 136 percent in fleets of large trailers and 102 percent in small trailers. That, he said, is because a truck driver's wages are no more or even lower than those of manufacturing or construction workers.
``If you can earn as much or more working on an assembly line, why would you want to be a trucker?'' he asked. ``When drivers are in high demand, turnover always seems to go up. This is not about pay, but about getting home."