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Thursday, April 18, 2024

Good and Bad news for trucking, more freight and less trucks to move it-CNBC

A report by CNBC says that there’s good news and bad news about trucking these days.

The good news is traffic is up! A good sign for the economy! (OK, there’s a caveat, but more on that in a minute).

The bad news? That the good news may lead to an economic headwind you weren’t expecting.

Is this good news/bad news important? You betcha. After all, trucks manage about 70 percent of the nation’s commerce. Face it, if you bought it at a store, it probably got there on a truck. So pay attention.

“Trucking stats are often used as a gauge (one of many) on the health of the economy,” pointed out Greg McBride, senior economist for Bankrate.com. “All in all, an increase in tonnage is reflective of increased demand, and that is a positive economic indicator.”

The Good News …

The tonnage of truck freight increased by 1.4 percent in the last month, according to the American Trucking Associations, reversing 0.6 percent fall in July. It was the largest pop since May and kept up a forward trend for three of the last four months.

OK, here’s the caveat. It’s freight as measured by weight. And it turns out the sectors giving trucks the most business right now—housing, automobiles and fracking—move a lot of heavy stuff. If you just count individual truckloads, it’s not much of a gain. In fact, it’s pretty flat.

And since a truckload of bricks, while weighing more, costs a lot less than a truckload of lightbulbs, it might not be saying that much about the economy. But then again, low end stuff moving now may mean high end stuff will move later. You got to build the house before installing the light bulbs. And at least the trucking trend is moving in the right direction.

“The significance of these numbers isn’t the August increase—because July was down after all—but the fact that it has been up in three of the past four months,” McBride said in an email response to questions. “The takeaway is positive.”

(For those of you who like cross-checking data, railroads seem to be seeing a slight uptick as well).

The Bad News …

There may be a shortage of trucks to carry the freight an improving economy produces. That’s the warning from an economist for the trucking group.

“We are headed for a capacity problem,” Bob Costello, chief economist for the American Trucking Associations, said at a recent conference. “The industry is not adding much capacity today.”

Indeed, during the latest economic doldrums, truckers did not make it a priority to add new equipment to fleets. In fact, they reconfigured equipment to do other work (like turning a dry-good hauling truck into a tank truck for the fracking business) or selling used trucks to overseas buyers, according to Costello.

On top of that, productivity is down, Costello said. Truckers are having trouble keeping qualified drivers because of competition from construction and energy outfits looking for heavy equipment operators. In addition, new government regulations about hours of service and new electronic logging procedures (which take time to learn) eat into the time drivers can be on the road, he suggested.

Obviously a lack of trucks could pose a problem for a recovering economy. if goods aren’t moving to where people can buy them, well, they don’t get bought.

Until, of course, economics kicks in—like higher wages for drivers and higher rates for trucks.

“I’m not suggesting fruits and veggies will rot,” Costello said in an email response to questions. “But when the crunch happens, the pendulum will move towards carriers. As rates then go up, it will be a little easier to increase capacity.”

Of course, those increased transportation costs get moved to the companies using those trucks and their customers. Transportation, however, usually makes up a very small percentage of the overall price of most goods.

Still, it’s a cost that wasn’t there before.

Allen Wastler is managing editor of CNBC Digital. Follow him on Twitter

. You can catch his commentary here and on CNBC Radio. And check out his fiction.