The pavement isn’t cracking underneath the freight economy, but expect demand to only rise modestly over the next several months, said Eric Starks, president of FTR Transportation Intelligence, at a Fleet Forum business conference.
He said, overall, the U.S. economy is robust and “nowhere near” slipping into recession, despite some industrial production running in “fits and starts” and that freight capacity currently “relatively loose.”
Starks cited several positive indicators in the U.S. economy, such as including employment, auto and light truck sales, stable fuel prices, and a modest rebound in housing. However, he added that both retail sales and business activity remain flat. He said for 2016 GDP growth is forecast to grow at very sluggishly, from 1.8 to 2.0%.
Starks said a big part of what’s holding businesses back is excessive inventories, which he cited as “a structural problem, throughout the commercial-vehicle market and the economy at large.
“Inventory levels are now problematic,” he continued. “Too much inventory reduces demand for freight transportation. We need to see inventories go down before [business] orders can pick up.”
Starks also cautioned that the drag on fleet operations from regulations, such as for electronic log devices and speed-limiters, is expected to affect utilization.
He said it remains to be seen if this will result in a need to make up for a decline in operational utilization. “A lot of [regulatory] pressure on drivers will compel carriers to boost productivity,” Starks noted. “Some of that will require educating shippers. Some may have to ‘fire’ shippers who don’t get what is happening.”