Trucking rolls with the economy
Oct 1, 2006 12:00 PM, By Charles E Wilson
WATCHING tank truck carriers scramble over the past year to keep up with demand, it's hard to believe that the US economy might be going into slow-down mode. However, that's just what some economists are saying. A few are even hinting at the possibility of a recession.
Any suggestion of a recession is probably too extreme, though. The US economy is fundamentally strong, and there should be plenty of loads for the tank truck industry through the rest of this year and into 2007. At worst, we may be seeing a pause in the US economic growth.
So, why are the economists becoming bearish? They cite a number of factors that include a cooling off of the red-hot housing market, a decline in automobile output, and higher consumer prices. A transportation sector economist said during the summer that the American Trucking Associations' truck tonnage index suggested that freight volumes could soften by the end of 2006.
All of these factors have contributed to economic forecasts being revised to project US growth at around 3% for 2006, down from earlier estimates of 3.4%. Economic growth in 2007 could fall below 3%.
That's not all bad, though. The US economy is still growing, and it's still one of the best in the world. The current expansion has lasted for nearly 60 months, and the economy probably has reached a point where it needs to catch its breath. As the transportation sector economist pointed out, a pause is typical in any long growth cycle.
Most importantly, slower growth is still growth any way you look at it. Many of the business sectors served by the tank truck industry are still doing very well. For instance, gasoline demand remained strong even when prices topped $3 a gallon during the summer. Chemical production was up 0.3% through August.
Despite a slowdown in new housing starts, public infrastructure and commercial construction activity remain strong. Billions of dollars in federal funding are flowing into infrastructure projects, such as highway construction and airport and mass transit system upgrades.
What does this mean for the tank truck industry? The fleets will remain busy. Shipment levels may be down for some traditional cargoes, but new products (such as ethanol) are entering the market and are giving the fleets new opportunities. Capacity constraints (due to driver shortages) may ease somewhat but not enough to cause a collapse in rates.
Tank fleets will continue buying and leasing new trucks, tractors, and tank trailers. A growing number of tank fleet managers have told Bulk Transporter that they can't delay purchases of trucks with the 2007 engines because their companies have to grow to keep up with customer demand. The buying spree for tank trailers also seems likely to continue well into 2007.
As the transportation sector economist put it: Trucking is the sweet spot of transportation. Pipelines, railroads, and barge lines have limited growth potential. Trucking is the only mode that can expand to keep pace with changes in manufacturing output and distribution patterns.
In light of all that, tank truck carriers may not even notice a pause in the US economy. That would be the best possible outcome.
© 2013 Penton Media Inc.
Acceptable Use Policy blog comments powered by Disqus