Wednesday, August 15, 2018

Trucking demand is procyclical!

Website from a trucking company documents the effects of a pro-cyclical increase in demand for trucking:

Well into the third quarter of 2018, the trucking industry continues to experience the highest demand and yet tightest capacity for freight services in recent memory. Unemployment is low, falling to 3.9 percent in June. The national GDP is growing—4.1 percent in the second quarter. The housing market is booming; the demand for homes—both new and lived-in—far outnumbers the supply, so prices are often too high for buyers, according to NPR.
    • large and small trucking companies alike saw both revenue and profits grow
    • carriers will likely continue to seek rate increases in order to compete in the tightest driver recruiting market in decades.
    • June was the 15th straight month in which prices increased on an annual basis in trucking’s spot market. 
    • "We believe that this is the strongest normalized percentage level of truckload pricing achieved since deregulation (normalized meaning except for extreme periods of recovery from recession)."
    • Some carriers are using most of these rate increases to pay professional drivers more to attract them to their fleets—and to retain the drivers they already have. 
    • By the end of 2018, Klemp predicts pay will have increased 12 to 15 percent, a significant bump but still not enough to make up for the 16 to 19 percent shortfall of driver wages when adjusted for inflation. 

1 comment:

  1. Question: The trucking industry is an example of a pro-cyclical increase (increase in demand positively correlating to state of the economy), would this mean that a good example of a counter-cyclical increase would be an increase in demand for trucking and movement of goods (transportation spending) in the midst of a recession? Or is it more complicated than that? Just trying to make sure I have the right understanding.