Sandy Impacts Trucking

The largest obstacle currently facing the trucking sector and many other industries is the US fiscal cliff. Collapsing economies in Europe and slowed growth in China could also potentially reduce US GDP growth to below 1% or eventually into a recession. If the US debt situation isn't handled by the government in the near-term, increased lending rates could eventually drive the US into a recession. The natural economic cycle suggests that the US growth will decline around 2014 or 2015. Aside from these macroeconomic headwinds that most industries face, the trucking sector has several reasons to be optimistic about the near to mid-term future outlook.

Noel Perry, a trucking economist with leadership positions at Transport Fundamentals and FTR Associates, provided several reasons for professionals in the trucking industry to remain optimistic. The aftermath of Sandy should provide more work and higher rates for professionals in the trucking industry. Hurricane Katrina was up to an $85 billion disaster; Sandy is estimated to total around $100 billion. Natural disasters prioritize the need for work initiatives, expenditures and construction that would normally be postponed. Enterprises that transport construction materials with flatbeds should see an increase in work as the Northeast region rebuilds.

Large storms like Sandy help improve trucking revenues by increasing the work load. There’s more overtime available and clients are ready to pay higher rates to get work done at an expedited rate. Perry projects that the trucking industry may realize around an additional $15 billion in revenue throughout the next year due to the Sandy storm. He expects the peak period to be around spring 2013 when the construction projects begin to ramp up again. Aside from the storm providing a positive impact for the trucking industry, there are indications of a US economic recovery that bode well for the truckers also.

Perry noted that the overall consensus among economists is that the economy will revert to normalcy in 2013 and US GDP growth should reach 2.5 percent by year’s end. The pivot point for truckers to watch for is 2 percent GDP growth, beyond this rate, tonnage growth increases significantly. Rates will also increase as supplies for new equipment have been relatively constrained during the recovery from recession. Perry expects truckload rates to increase around seven percent in the fourth quarter of 2013 compared to fourth quarter 2012. By 2014, federal health, training and safety regulations could require another 100,000 truck drivers beyond current levels.

The need for more truck drivers is expected to increase throughout the next couple of years. Aside from regulations improving employment in the trucking sector, auto sales are approaching normalcy and the housing market has improved. The increasing number of new houses also bodes well for flatbed enterprises. Overall, the US job market is stabilizing and the metrics are improving as more people begin looking for work again. Orders for capital goods, durable goods and consumer goods have improved marginally as well. Perry expects manufacturing goods demand to rebound as the US economy continues to recover.


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