What’s in Print
US economy continues modest, steady growth rate Indysystem/iStock/Thinkstock

US economy continues modest, steady growth rate

AFTER two years of decline, tank truck loads are projected to slightly outpace truckload freight overall. That should come as welcome news for the tank truck carriers that were once flying high with the oilshale boom, according to Bob Costello, chief economist for the American Trucking Associations.

He reviewed the outlook for the tank truck industry, as well as trucking overall, during his annual economic update presented at National Tank Truck Carriers’ 69th Annual Conference in Chicago, Illinois.

Costello projected that tank truck loads should grow by about 1.6% in 2017, compared with overall truckload growth of around 1.5%. Tank truck loads shrank by more than 1% in total during 2015 and 2016 in the depths of the oilshale bust.

“No industry sector benefitted more from development of the shale oil plays and fracking than tank trucking,” Costello said. “The oilfield is getting busy again. More oil wells are being drilled, and US crude oil production is rising. However, $100-a-barrel oil is highly unlikely.”

Taking a macro look at the US economy, Costello predicted moderate growth in gross domestic product in 2017 and 2018. “Real GDP growth for 2017 should be around 2.1%, and should average 2.4% from 2018 to 2020,” he said. “The economy seems to be on solid footing right now, and we are seeing more optimism in the business sector.”

The supply chain has made significant progress in cleaning out excess inventories, which is a big positive for truck freight. Business investment has increased at one of the highest rates in recent years.

Costello also cited the possibility of reforms—including tax reform and reductions in environmental regulations—that could reinvigorate the US economy.

Economic activity is slowly accelerating, and trucking companies should feel that things are better today than in 2016. Freight levels are growing again, but at modest levels.

Costello said he sees no indication that the economic recovery from the Great Recession will end anytime soon. “There is nothing that suggests another recession is likely anytime soon,” he said. “Even though we are approaching the duration of the longest previous recovery, we don’t see any recession triggers right now.”

On the upside, housing starts are leveling off at a sustainable pace, and factory output should grow by about 2.6% this year. Light vehicle sales should average 17.5 million units through 2020.

US plastics production is on track to continue a slow recovery and should grow by about 1.4% this year. Production levels are forecast to increase 4.6% in 2018 and 4.9% in 2019.

Chemical product should rise by about 1.8% this year, followed by growth of 3.4% and 4.0% in 2018 and 2019 respectively. US paint production should rise by 4.4% this year, before growth moderates to 2.4% in 2018 and 2.7% in 2019.

Cement output continues to improve and should grow 3.5% this year, followed by 3.9% growth in 2018. Production of other mineral products—clay, lime, and gypsum is growing by 5.5% this year followed by 3.4% growth in 2018.

Food production remains steady, growing at a rate of about 2% annually.

While generally optimistic in this year’s economic report, Costello offered some words of caution. He said potential economic threats linger in areas such as trade policy (the North American Free Trade Agreement in particular).

The trucking industry continued to buy too many new trucks at a time when freight levels were very soft. Purchases of trucks for fleet expansion appear to have slowed dramatically.

Costello expressed concern about the electronic driver log mandate that takes effect in December. He cited a www.truckstop.com survey of 1,300 carriers—a majority of which operate fewer than six trucks—in which respondents said they had no electronic logging devices (ELDs) in any trucks at this time.

Studies suggest that less than 50% of the commercial trucks operating in the United States have ELDs, and Costello said he believes participation could actually be under 40%.

Truckload carriers that have adopted ELDs are generally larger and more sophisticated than most of those that haven’t. The fleets with ELDs are seeing lost productivity, and that impact could be much bigger as the mandate takes effect across the entire trucking industry.

Drivers and carriers are almost certain to exit the industry. “What if just 1% to 3% of truck drivers leave the market for a host of reasons, including log cheaters, anti-technology, anti-big government, or just an unwillingness to change,” Costello asked. “Some carriers also are likely to exit the industry. We still don’t know the enforcement impact from law enforcement, liability insurance carriers, shippers, and truck brokers.”

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