Trucking giving mixed signals on clues to possible economic slowdown

The trucking industry is usually a reliable early indicator of any economic slowdown affecting the economy. Usually, but in late 2022, not always.

There are mixed signals emanating from the usual barrage of economic figures released by various sectors of the trucking industry.

For example, the American Trucking Associations’ (ATA) advanced seasonally adjusted for-hire truck tonnage index rose 2.8% in August. That came after decreasing 1.5% in July.

“Tonnage snapped back in August after a weaker than expected July,” said ATA Chief Economist Bob Costello. “With the economy in transition to slower growth and changing consumer patterns, we may see more volatility in the months ahead.”

But Costello said the good news is the industry continues to see areas of freight growth in consumer spending and manufacturing, which he said is helping to offset the weakness in new home construction.

Despite rising truck tonnage month over month, other analyses of truck freight conditions were muted in August. Several respected industry experts are now predicting truck freight and carrier conditions will soften slightly in the final months of the year.

The Institute for Supply Management’s manufacturing survey declined to 52.8% in August. That’s its lowest figure in 28 months. While numbers above 50% signify economic growth, the index has fallen sharply since earlier this year.

“Trucking companies had a great run, but freight dynamics clearly have softened,” Avery Vise, FTR vice president of trucking, said in commenting on FTR's recent Trucking Conditions Index (TCI) report l.

FTR actually increased its TCI for July to -0.7 after a -3.36 fall in June, though Vise says most of that positive change was attributed to fuel prices. Freight volumes and market strength are clearly falling from earlier 2022 highs. FTR says its TCI has now registered negative readings three months in a row, the first time that has occurred since March to May 2020.

“While the economy and freight markets look more resilient than many observers fear, risks are weighted to the downside,” Vise says.

Pitt Ohio Executive Vice President and Chief Marketing Officer Geoffrey Muessig said that it’s true LTL freight demand softened in the third quarter and that LTL demand in 2022 is not quite as strong as it was in 2021.

“However, it needs to be noted that LTL carriers experienced red hot demand for their services in 2021,” Muessig told LM. “We’re busy and demand for our LTL service is strong in 2022. Most of our LTL drivers continue to work many overtime hours each week since the driver availability is still restricted.”

As for economic expectations in 2023, Muessig said they “are all over the board.” Some shippers expect business levels to remain strong, he said, while others are planning for a shallow drop in shipment count.

“Very few of our shippers have voiced concern about a steep recession to me,” Muessig said.

ACT Research offered similar analysis in multiple releases of data. In the company's latest For-Hire Trucking Index, August volume was flat with fleet productivity/utilization down 7 points month over month.

Some analysts are even bracing for a “trucking winter” on signs weaker demand and falling transport prices could extend through early 2023. Recently, research firm KeyBanc downgraded J.B. Hunt and Schneider, moving them to “neutral” from “buy.”

But leading executives from some of those companies say the peak season has been just that—a return to late-year seasonality of demand starting with back-to-school supplies through Halloween demand and hopefully through the holiday season.

“There’s been a sense of normalcy,” Schneider CEO and President Mark Rourke told LM. “Demand is quite healthy, especially in some sectors. It feels more like 2018 through 2020.”

For some, diesel fuel supply and costs—around $4.89 nationally and above $6 in California, according to the Department of Energy—are the biggest concerns to carriers and shipper representatives.

West Texas Intermediate crude rose over 14% last week to reach over $93 a barrel. Fuel is a fleet’s second-largest expense, after labor, although some of the rise is mitigated by fuel surcharges. But supply is also at issue.

Last week, a coalition that includes the U.S. Chamber of Commerce, state and local Chambers from across the nation and trade associations called on the Biden administration to remove impediments to greater domestic energy production. That included abandoning an administration proposal to ban new offshore lease sales.

They told President Joe Biden that businesses of all sizes are facing burdens from increased costs for goods, services and transportation which are threatening the economy. And they said mixed signals from the administration regarding domestic energy production are complicating necessary investments in refining capacity, exploration and production.

Recently, Washington missed the deadline to finalize a new five-year plan for offshore oil and gas development—the first time in history that a lapse has occurred.

The Chamber specifically called for ending the ban on new oil and natural gas exploration on federal lands and waters, restoring cancelled lease sales and adopting a five-year plan for offshore oil and gas development that allows the U.S. to fully leverage its offshore energy potential.