LAS VEGAS — American Trucking Associations Chief Economist Bob Costello issued his forecast for trucking 2013. It isn’t rosy, but neither is it gloomy.
“Unfortunately for the next few months freight volumes are going to go sideways,” Costello told delegates to the ATA Management Conference and Exhibition here Wednesday.
Costello predicted that flatbed carriers would continue to do well, thanks partially to an increase in housing starts. Flatbeds will continue to do well.
Because of fracking, the process to get natural gas out of shale, tank trucks will be the best sector, he said, and capacity “is in a decent place.”
Costello was one of three members of a panel that also included Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors, and Gregory Daco, senior economist at IHS Global Insight.
All during the 40-minute discussion moderated by Stuart Varney of Fox News the three panelists tempered remarks around the so-called “fiscal cliff,” the simultaneous onset of tax increases and spending cuts that will be triggered on Jan. 1 that many believe would push the country back into recession and drive unemployment up even higher.
Costello sees one of the industry’s 2013 pressure points being pressure on fleets to replace equipment.
He called it “The New Diesel Fuel,” a reference to the industry’s angst when diesel spiraled out of control in 2008.
“We’ve seen small fleets have to downsize because they had to sell two older tractors just to buy one new tractor,” he said.
“Eventually, when we get past this fiscal cliff problem you’ll see a resurgence of this replacement demand, not necessarily a lot of capacity building. There are still a lot of trucks out there that need to be replaced,” he said.
Yun said that cumulatively over the next couple of years, housing starts will be up about 50 percent.
“Those will be solid gains, but we have to remember we need to increase 100 percent just to get back to normal,” he said, noting that his forecast was good only if the nation didn’t fall off the fiscal cliff. “Home prices will increase 5 percent next year and another 5 percent the following year so that’s a 10 percent growth that means there will be fewer underwater homeowners and once they get above water they begin to move to newer homes.”
Daco told delegates that he sees the U.S. economy growing at a modest pace around 2 percent this year and a little below 2 percent the next year.
In terms of what’s driving the economy, there are new drivers, he said.
“We talked about housing, but other traditional drivers such as U.S. exports are slowing because of the global slowdown,” he said. “In terms of the three risks I see for the U.S. economy the first is the domestic risk, the uncertainty around the fiscal picture.”
The debt ceiling will probably have to be raised, so that’s another uncertainty, he said.
Then there are two foreign risks, Daco said.
He predicted that there would be a “soft landing” of China economic woes, and said the U.S. could withstand a mild European recession, but could not withstand a full-blown financial crisis there.
During his presentation, Costello said that despite the fact that volumes overall are going up, capacity “remains relatively in balance to demand.
“However, if the overall economy were to surprise us on the upside — with, say 3 percent GDP growth for several straight quarters — we would not have enough trucks to handle the corresponding increase in freight,” he said. “This speaks to the continued threat of our current quantitative driver shortage of 20,000 to 30,000 drivers potentially getting worse in the future.”
Another area of concern for Costello was the “sharp deceleration in manufacturing orders, which will limit manufacturing output and thus put a damper on truck volumes in the coming months.”
The Trucker staff can be reached to comment on this article at email@example.com.
Find more news and analysis from The Trucker, and share your thoughts, on Facebook.