Though there’s some disagreement by how much, economic experts are predicting a 2019 slowdown for the trucking industry, a trend that most certainly will affect virtually every aspect of the onion industry.
Two major stories caught our eye during the past few weeks, starting with a post on BusinessInsider.com in mid-December. Researched and written by Ethel Jiang at https://markets.businessinsider.com/news/stocks/trucking-stock-weakness-signals-big-industry-slowdown-ahead-analyst-says-2018-12-1027817574, the Dec. 18 post started off by citing the pressures endured by trucking stocks and how the stocks had dropped more than 20 percent since September. “Lower demand and a drop in oil prices are starting to ‘take their toll on trucking-industry pricing power,’ according to Nicholas Colas, co-founder of DataTrek Research,” the story said. It went on to say, ‘“It’s become more obvious that freight-demand and pricing gains will slow meaningfully in 2019,” Matthew Young, an equity analyst at Morningstar told Business Insider.”
The story then cited individual trucking companies and their individual stock slides that ranged from minus 24.41 percent on the low side to 27.17 percent on the high side. Jiang wrote, using information from Young, “Trucking stocks saw their valuations soar over the past few years, largely due to a favorable pricing backdrop brought on by unusually tight capacity.”
Jiang also looked at the shortage of drivers, noting that “massive demand from retail giants such as Amazon have added to the difficulty of finding trucks and drivers, giving the industry pricing power.
But the demand for trucking has seen a slight slowdown in the second half of this year amid the ongoing trade war between the US and China, according to Federal Reserve’s Beige Book published in November.
Data from the US Department of Transportation show the growth rate of the US truck tonnage shipped slowed to 5.4 percent in year-on-year July, down from 10.1 percent in June, after President Donald Trump’s first round of tariffs took effect.” She added that the growth rate bottomed at 5.2 percent in August and “hast recovered a bit, an unusual seasonal pattern that the Beige Book says is happening as firms try to import goods before additional tariffs on Chinese goods take effect next year.”
A second transportation article that jumped out at us was “Infrastructure, Trade Loom Large for Trucking in the New Year,” written by Senior Features Writer Daniel P. Bearth and published Jan. 4 at
https://www.ttnews.com/articles/infrastructure-trade-loom-large-trucking-new-year.
Bearth’s take is that freight carriers will adjust to a slower “but still positive” rate of growth in 2019, citing “industry experts interviewed by Transport Topics.” He said, “Spending on infrastructure is expected to be a priority for Congress and President Donald Trump, while the outlook for global trade will hinge on whether the new United States, Canada, and Mexico Agreement eventually is ratified and on the outcome of negotiations with China and the European Union on future trade deals.”
Comments from American Trucking Associations’ Chief Economist Bob Costello indicated the expectation of “continued growth in demand for freight hauling, but at a slower pace than in 2018,” and Costello was quoted as saying, “We have hit the peak in the current freight cycle. The economy is still growing, just not as fast as it has been in 2018.”
Costello, according to Bearth, “projects a 2.5 percent increase in U.S. gross domestic product in 2019, which still qualifies as one of the better years in the current economic expansion cycle that is already one of the longest in history,” and “while he sees little or no chance of a recession, Costello does expect freight activity in the first quarter to be weaker than normal because of changes in shipping patterns caused by the threat of tariffs on Chinese goods.”
The Dec. 1agreement between President Donald Trump and Chinese President Xi Jinping at the G-20 summit in Argentina put into effect a “90-day truce on more tariffs has given the two sides more time to negotiate, but arrived too late to stop a flood of imports for the holiday shopping season.”
Though the damage was done, Costello told the reporter he was “bullish about overall demand for freight hauling due to continued growth in domestic manufacturing and construction activity.”
Ken Simonson, chief economist for the Associated General Contractors of America in Washington, was also tapped, and he was quoted:
“Businesses that depend on imports or exports, including ports, transportation, and logistics firms, may defer or cancel construction projects until there is a ‘cease-fire’ in the trade skirmishes. However, neither labor supply tightness nor tariffs are likely to lead to much acceleration of inflation at the consumer level, as many firms will try to absorb cost increases through productivity improvements.”
Mike Jackson, executive director of strategy and research for the Original Equipment Suppliers Association, said, “Consumer confidence is at an 18-year high. It’s a remarkable thing.” And Jim Robey, a regional economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, MI, said, “Consumer confidence is incredibly high, the cost of capital is close to zero with inflation figured in and people are working.”
There was a big tech side to the story, noting that “trucking and logistics service providers can expect continued progress in automation of supply chain processes, the commercial debut of a hydrogen- electric Class 8 truck and plenty of mergers and acquisitions.”
Doug Waggoner, CEO of Echo Global Logistics, was quoted as saying this could be ‘“ the year of AI’ with process automation and machine learning helping to boost productivity of personnel providing freight-matching and logistics services.”
And it’s clear that technology is advancing for what Bearth termed “self-service options for carriers and shippers,” Waggoner told the writer, “Many of the exceptions we track can’t be managed by an algorithm — only by a person. It’s critical that automation not replace human work, but allow more efficient use of time.”
Add to those issues more regulations, including a new drug and alcohol clearing house that’s on the books and “slated to take effect in January 2020.” Hours on the road and another bill that could lower the minimum age for commercial truck drivers in interstate commerce could also be part of the moving landscape.
And while you’re considering all the changes looming ahead, there’s the elephant in the room.
Amazon.
