ARLINGTON, Va. — While the overall economic impact of Hurricane Sandy will certainly be negative, there are industries that see a spike in activity during the rebuilding phases, including construction companies, manufacturers of construction material and trucking companies.
Specifically, flatbed carriers typically see a strong boost in construction freight related to rebuilding, according to a special economic report produced Wednesday by the American Trucking Associations.
“We fully expect fleets to see an increase in activity in the coming weeks and months during the clean-up and rebuilding phases,” ATA Chief Economist Bob Costello said in the report. “Dry van carriers will likely see a boost in freight from retailers replenishing store shelves that were depleted in the days before the hurricane, but of course these fleets saw a lull in freight in the Mid-Atlantic and Northeast during the last few days.”
Hurricane Sandy hit an area of the U.S. that is not only densely populated, but is also a vastly important economic region.
According to IHS Global Insight, the initial estimate of economic losses are in the $30-$50 billion range, or 0.2 percent to 0.3 percent of nominal (not inflation adjusted) gross domestic product (GDP).
As a result, the loss of economic activity will have a negative impact on the fourth quarter real (i.e., inflation adjusted) GDP reading, the ATA report said.
Specifically, it could reduce the annualized growth rate this quarter by 0.6 percentage points.
“We were expecting GDP to increase less than 2 percent this quarter to begin with,” the report said, cautioning industry stakeholders that the estimates are very preliminary and could change as the damage is assessed further.
Flatbed freight volumes have already improved this year related to an improved housing construction market with new housing starts up 26.3 percent year-to-date compared with the same period last year.
Flatbed loads are up 7.3 percent year-to-date.
Flatbed carriers should expect solid demand in the affected areas in the months ahead, which will help offset the decelerating flatbed freight related to slower steel production, the report said.
“Additionally, capacity for flatbed carriers could tighten due to the strong hurricane related demand, although this will be partially offset by excess capacity related to a slowdown in the steel industry,” Costello wrote. “Furthermore, because construction related freight fell an unprecedented amount during the Great Recession, more capacity was lost in the flatbed industry, in percentage terms, than in any other TL sector as many fleets went under as freight dried up.
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Meanwhile, Stephens Inc. said in special report that major hurricanes have historically served as a catalyst for trucking stocks as rebuilding/replenishment efforts provide a favorable shock to volume and pricing dynamics.
“In Sandy's case, the fact that the hurricane made landfall relatively late in the year and hit a high density geography could create enough trucking volume to offset the lost revenue days and fill the pre-holiday void, essentially elongating the peak shipping season and potentially creating an upside to fourth quarter expectations scenario,” the Stephens report said.
“While we will wait to see the eventual demand created from Sandy to change any estimates or ratings, given how beat up trucking stocks have been as of late, we do think
this event could provide a much needed catalyst for the group,” a Stephens analyst said.
While noting the sadness that comes with such an horrific event, Stephens nevertheless called the event “a catalyst that trucking stocks sorely needed.”
Since the second quarter of 2012, truckers have been plagued with slowing demand, rising fuel prices and a plethora of earnings misses, the Stephens report said.
“These events have led to one of the worst third quarter stock performances for the truckers relative to the S&P 500 in 15 years and pushed valuations on average 20 percent below their long-term norms,” the analysts said. “With third headwinds behind us, we think trucking stocks could move materially higher on the heels of Hurricane Sandy
and throughout peak shipping season, the extent of which will be largely contingent on the eventual demand Sandy creates.”
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