Trucking Soars Despite Six Months into COVID-19
The United States is more than six months into the COVID-19 pandemic and it looks like the trucking industry is growing stronger every day.
Stephen Burks, an economics professor at the University of Minnesota-Morris and a former less-than-truckload driver in the 1980s. “Some parts of trucking have come back much harder than anyone expected, much faster. They’re cooking,” Burks said. “But it’s uneven.”
Stifel Global Transportation and Logistics Equity Managing Director David Ross agrees. Ross also authors reports on the Cass Freight Index for Shipments, which was 1.018 in July. The index is down 13.1% from the same period a year ago, but sequentially up 4.8% from June. The Cass Truckload Linehaul Index, a measure of rates per mile, was 129.8 in July — down 5.7% year-over-year and 0.1% from June.
Ross said the July results were “better than expected” in the trucking market.
The DAT Truckload Volume Index, a measure of dry van, refrigerated and flatbed loads moved by truckload carriers, was 1383, up 3.7% in July and up 2.1% month-to-month. Ross said the July results were “better than expected” in the trucking market.
The report said the index bucked seasonal trends.
“States are reopening at different rates and are being hit by the virus at different times. This is leading to unseasonal peaks and valleys in manufacturing output and consumer demand,” said Ken Adamo, chief of analytics at DAT. “Carrier networks are out of balance due to inconsistent freight demand at a commodity and lane level, and this is leading to a spike in demand for spot freight in order to meet the capacity need.”
DAT says trucking’s flatbed sector is doing well as home construction activity remains strong, contributing to a national flatbed load-to-truck ratio of 24.8 in June (the highest number since July 2018). July flatbed volume was steady compared to June and down 6.6% compared with July 2019.
“The entire supply chain is being forced to adapt to changes in consumer buying patterns, which affects everything from the equipment types needed for delivery to warehousing capacity,” Adamo said. “Increased online shopping is here to stay, and shippers and carriers alike are being forced to adjust.”
American Trucking Associations Chief Economist Bob Costello said the economy is shifting from consumers spending money with companies that provide services, such as hotels and restaurants, to purchasing goods.
Americans, stuck at home during the pandemic, are using the time to remodel, fix and redecorate. For trucking, this is good news.
“On the consumption side, it’s hard to spend money on services during a pandemic, when you are trying to social distance. So, what are you going to buy if you’re not buying services? You’re going to buy goods,” Costello said. “Housing starts picked back up. All of that helped trucking.”
Meanwhile, the Logistics Managers’ Index, a survey of logistics executives, showed trucking capacity tightened to a 22-month low of 42.8% — above 50% represents expansion — as large trucking companies appear reluctant to add capacity.
“In order to add additional capacity, there is a cost of doing so and especially right now,” Werner Enterprises CEO Derek Leathers said. “I can’t overstate some of the issues going on in the supply side.”
Leathers said there’s another factor tightening capacity. Older drivers are accelerating their retirement plans and, because of the pandemic, it’s harder to get new drivers into the industry.
Leathers also said 21,000 drivers have temporarily lost their commercial driver licenses after testing positive in the Department of Transportation’s new Drug and Alcohol Clearinghouse.
“That’s not an insignificant amount of drivers,” Costello said. “And when you add up all these factors, capacity is getting tighter.”
The nation’s economy continues to struggle.
The U.S. trade deficit surged in July to $63.6 billion, the highest level in 12 years, as imports jumped by a record amount, the U.S. Department of Commerce reported Sept. 3.
The nation’s economy continues to struggle.
The same day the Department of Labor said the number of laid-off Americans applying for unemployment benefits fell to a still-elevated 881,000 last week, evidence that the viral pandemic keeps forcing many businesses to slash jobs. In the previous week, more than 1 million sought jobless aid.
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