The Road Ahead in 2014: Cheaper Fuel, More Rules

By: Classadrivers.com

After completing a recap of 2013 in freight transportation, I looked to economists, analysts and other industry experts who offered forecasts for 2014. The consensus is that positive and negative factors will pull in opposite directions.

The most likely outcome is a year of relative stability, which can be interpreted as recession, stagnation or growth, depending on your point of view. Optimists can appreciate the opportunities inherent in a (largely) predictable business environment, while pessimists can focus on downside risks. There's something for everyone:

ECONOMY: Continued Slow Growth - The economy gained strength in December, and consumer confidence rose 8.5%, according to the Conference Board. The Institute for Supply Management reported significant gains in both manufacturing and employment, accompanied by stability in the Purchasing Managers' Index (PMI.) New housing starts increased, and the stock market rebounded, too.

On the other hand, gains in employment did not boost the workforce participation rate beyond 63%, and new regulations make some employers skittish about hiring. All told, analysts estimate that GDP rose by 1.8% in 2013 and predict growth of 2.25% to 2.5% in the new year, with unemployment hovering at about 7% for the first six months or more.

FUEL PRICES: Increased Supply May Match Demand Pressure - With domestic fuel production on the rise, you might expect declining prices at the pump in 2014. Increases in demand, plus proposed tax increases, and any further upheaval in the Middle East, may all exert upward pressure on prices. The net result could be a decline in fuel costs, but possibly no more than the 1% to 2% savings of 2013.

REGULATIONS: HOS and its Challenges - New Hours of Service (HOS) regulations went into effect on July 1, but the law has been challenged in court and in Congress. Several studies indicate that certain aspects of the new HOS rules, may contribute to unsafe driving instead of preventing it. The FMCSA may be required to roll back the rules, pending a resolution. Meanwhile the agency is expected to issue a proposed mandate for the use of Electronic Logging Devices (ELDs) which will record drivers' adherence to HOS. Stay tuned.

TRUCKING FREIGHT: Tonnage Growth Outpaces GDP - For-hire trucking freight tonnage expanded 5.8% (year to-date, through No GDP in 2014, but vember) according to the American Trucking Associations. Several industry analysts predict that tonnage will continue to expand faster thannot fast enough to create a serious capacity shortage.

TRUCKLOAD CAPACITY: Tighter, no Crisis Expected - Demand is increasing, but carriers are not expanding their fleets and there is a finite number of trained drivers. There were definitely pockets of tight capacity in 2013, but overall, the market for truckload transportation was in a state of relative equilibrium. If and when the economy grows at a steady rate of 2.8% or higher, the much-anticipated capacity shortage may finally emerge, adding to pressure on freight rates, according to Bob Costello, the ATA's Chief Economist.

INTERMODAL - Competion Increases for Truckload Moves - Rail intermodal freight moves were up 4.7% as of mid-December, according to investment analysts at Stephens Inc. For-hire truck freight tonnage grew at a respectable 5.8% in the same period, but rail intermodal is competing more effectively in long-haul routes. One outcome is to reduce the average length of haul for over-the-road trucks. At the same time, the presence of an intermodal alternative keeps truckload rates low in rail-competitive lanes.

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Note: This article was adapted from DAT’s blog post on www.DAT.com. It was first published in January 2014