Housing and automotive declines likely to impact 2007 freight movements
Jeff Berman, Senior Editor -- Logistics Management, 11/9/2006
NASHVILLE, Ind.—A downward housing market and ongoing production cutbacks in the domestic automotive industry—coupled with their potential effects on the United States economy—are contributing to what is a mixed outlook for the 2007 transportation market, according to transportation research firm, FTR Associates.
FTR forecasts that the U.S. gross domestic product will grow by 2.7 percent in 2007, with consumer expenditures and industrial production growing at 3.1 percent and 1.5 percent, respectively. The latter is down sharply from the 4.3 percent FTR predicted for this year, and may reduce the growth rate of heavy-duty truck freight movements to 0.5 percent next year (it was forecasted at 2.9 percent for 2006).
Eric Starks, FTR president told Logistics Management that while it is still too early to definitively say these forecasts will hold true, he said the negative performances in the housing and automotive industries will continue to decrease truckload freight capacity.
“Things in the freight environment are not awful yet, but we are seeing a slowdown,” said Starks. “There will be some more pains down the road for trucking, because of what is happening in the housing and automotive sectors. We have not hit the floor yet in housing, but we are close. And while auto sales are still ok, auto production is expected to continue to decline and will have an effect on freight [movements]. If things keep softening, it could be a pretty big hit for the trucking industry.”
On the bright side, Starks said that U.S. exports have been fairly healthy. Business investments into the equipment area have also been strong from a freight standpoint, as overall industrial production begins to ease. He added that this will have a subsequent impact on freight demand, but it is likely to have a modest effect.
But if there is not much freight growth—and with a large number of new trucks expected to hit the road next year—there is the potential for imbalance in capacity next year, said Starks. And with these new trucks entering the system (estimated by Starks to be up to 370,000 by the end of next year) there is also the potential to be an ease in capacity constraints, which may favor shippers because rates are less likely to increase in that type of situation.
During the fourth quarter of this year and throughout next year, FTR estimates that 360,000-to-370,000 new Class 8 trucks will be on the road and put into service in North America. Starks said that this number includes 90,000 trucks in this quarter and roughly 60,000 more during the first quarter of next year. These numbers are based on researching industry associations and sales forecasts.
View All On-Demand Webcasts
