The fourth-quarter Transport Capital Partners (TCP) survey suggests the slow, but upward growth of the economy is moving the freight market to a higher level.
Continuing the positive trends of last quarter, more carriers are expressing optimism for increases in volumes and rates. The steady growth of the economy is producing increasingly positive expectations from carriers. Since the fourth quarter of 2012, positive volume expectations have risen to 61% from 29%.
Following from expectations of increased volumes, a majority of carriers are also expecting rates to climb over the coming 12 months. Almost three times as many carriers are optimistic about rate increases than those that are pessimistic. Smaller carries (those grossing under $25 million per year) are slightly more positive about rate expectations that their larger counterparts - 65% vs. 60%.
“Volumes and rates continue to be more entwined as positive GDP numbers are laid on top of effective capacity brought down by the CSA driver hour mandates,” says Steven Dutro, TCP Partner.
“If 5-10% of driver hours have been reduced in the systems, 5% to 10% more drivers are required with higher pay. And in most cases it appears carriers will need to buy more trucks, adding to their fixed costs.”
Despite this optimism, rate and volume growth has yet to fully materialize--aside from the construction, petroleum, and seasonal freight sectors. For the past 16 quarters (since February 2010), a majority of carriers have expected rates to increase. However, it is only since the first quarter of 2013 that rates have actually risen.
Seventy-two percent of carriers saw rates remain the same for this quarter. It should be noted that more of the smaller carriers experienced rate increases than larger carriers--36% versus 20%.
TCP Partner Richard Mikes notes: “Initial carrier contacts and load board reports show strength in spot market rates. This, coupled with positive political news in DC, gives hope for stability in the economy with carrier rate expectations in the survey.”