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2016 Will Be A Year of Stability for Trucking

Trucking Continues to Move Forward with Cautious Optimism

The fourth-quarter Transport Capital Partners (TCP) survey finds carriers remaining positive, despite tempered expectations, and looking toward stable growth in 2016.

Undeterred by continuing volatility around the world, the United States economy will likely continue its steady upward climb in 2016. And, as is often the case, the trucking industry presents us with an accurate mirror to movements in the economy at large.

Economic events in the 4th quarter of 2015 left expectations at their lowest levels in over 5 years. However, motor carrier executives remain optimistic that 2016 will bring solid growth for their companies.

“Expectations are lower than in recent years but are still positive for 2016. The indication is for a stable business environment and little fear of a recession,” summarizes Steven Dutro, TCP Partner.

Many, Not Most, Still Positive About Rates

At the beginning of 2015, 79% of the participants in our survey were looking forward to rate increases over the year ahead. Turning the page into 2016, that number had dwindled to 41% – the lowest percentage we have recorded since 2009.

Despite this dampened optimism, positive expectations remain strong. Forty-one percent of those surveyed still expect their freight revenue rates to rise this year.

“In this survey, and in carrier discussions with TCP, we are seeing more variation in the opinions of individual carriers than in prior years. Any further tightening, caused by a small increase in demand or driver shortages, will have a proportionally greater upward impact on spot and contract rates,” notes Richard Mikes, TCP Partner.

Carriers Most Positive About Capacity

Perhaps most telling of industry expectations for 2016 is that a strong majority – 61% of carriers – expect to expand their fleets this year.

“Growth expectations are not quite as robust as they were in 2014 and 2015. But, this number is still relatively consistent with the expectations – and the modest growth – of the past few years.” -Steven Dutro, TCP Partner

Read the full survey results here.

Contact:

Richard Mikes
Office: (239) 395-2595
rmikes@transportcap.com

Steven Dutro
Office: (970) 204-1492
sdutro@transportcap.com

The Business Expectations Survey by TCP, now in its seventh year, has given forward-looking guidance from industry leaders through both sides of the economic cycle. Mikes and Dutro both have senior-level experience advising carriers on strategic and operational issues as well as in mergers and acquisitions in the trucking industry.

About ACT Research Co., LLC

ACT Research, a contributor to the Blue Chip Economic Indicators, has been the recognized leading publisher of commercial vehicle (CV) industry data, market analysis, and forecasting services for the North American market since 1986. Their commitment to data quality & integrity; in-depth analysis; and timeliness have made their services the industry standard.

For more information, visit www.actresearch.net.

Transport Topics quotes TCP regarding “Experts See More to Come”

Transport Topics article on August 4, 2014, Transport Acquisitions Rise, quotes TCP extensively.  We see several factors building interest in mergers and acquisitions but with some caution if the economy slows.

Read the full article here.*

*Highlights denote Transport Capital Partners quotes

Capacity Growth An Inevitable Result of Lowered Utilization

Commercial Carrier Journal (www.ccjdigital.com) and TruckingInfo.com both recently ran stories highlighting TCP Survey data from the 4th Quarter Business Expectations Survey.

The survey showed a large majority of carriers expecting to grow capacity, and many moving to replace their aging vehicles.

The new hours-of-service rules have resulted in lower utilization of equipment. As a result, carriers are being pushed to increase capacity and raise driver pay.

The number of carriers indicating they are not going to add capacity has been trending down, and is now at its lowest level yet for the TCP survey, at just 27 percent.

Larger carriers expected to be more aggressive in adding equipment than smaller carriers. Thirty-nine percent of larger carriers expected to add between 5% to 15% compared with only 27% of smaller carriers.

“We suspect that all the 2007 pre-buy tractors are being traded out. If smaller carriers are not able to replace older, less fuel-efficient equipment (and their higher maintenance costs), those carriers will not be well positioned to benefit from looming good times,” says TCP Partner Richard Mikes.

TruckingInfo.com Article: http://www.truckinginfo.com/news/story/2014/01/capacity-growth-an-inevitable-result-of-lowered-utilization.aspx

Commercial Carrier Journal Article: http://www.ccjdigital.com/monday-money-carriers-to-add-capacity-freight-indices-mixed-union-votes/

Entry-Level Drivers Will Be Sought

With the many changes taking place in the regulatory and economic environment, many carriers are reviewing their labor policies. Highlighting 4th Quarter BES results, Commercial Carrier Journal (ccjdigital.com) recently reported on these trends.

The TCP survey showed less than 30% of carriers hiring inexperienced, entry-level drivers. But that number is set to grow. Slightly over half of all carriers expect to soon be training and utilizing inexperienced, entry-level drivers.

While this majority is slight, a stunning 84 percent of carriers are willing to support allowing younger, properly trained drivers to enter the driving pool.

“We believe this means they support other carriers hiring and training younger driver so that they can then poach them later,” says Richard Mikes, TCP Partner.

Read the article here.

Carriers Sensing an Improving Marketplace

TCP survey results in a recent TruckingInfo.com article show improving conditions in the industry, but also some cause for hesitancy.

The steady growth of the economy is producing increasingly positive expectations from carriers. A majority of carriers are expecting volumes and rates to climb in 2014.

But despite this optimism, rate and volume growth has yet to fully materialize – aside from the construction, petroleum and seasonal freight sectors.

Over the last 16 months, a majority of carriers have expected rate increases. However, only since the first quarter of 2013 have rates actually risen.

But Richard Mikes, TCP Partner, notes, “Initial carrier contacts and load board reports show strength in spot market rates. This, coupled with positive political news in D.C., gives hope for stability in the economy with carrier rate expectations in the survey.”

For the complete article click here.

Smaller Carriers May Be Disadvantaged Under ACA

According to a recent Transport Topics article citing TCP survey results, smaller carriers are more likely to report adverse effects from the Affordable Care Act than larger carriers. Thirty percent of smaller companies are considering dropping health coverage for employees compared with only 10% of larger carriers.

The article quotes TCP partner Richard Mikes, ”Smaller carriers are at a disadvantage to find and retain drivers if they cannot compete with the health packages offered by larger carriers.”

The new health care law will require most companies with more than 50 employees to provide health insurance to workers.

Read more here.

Do Shippers Care About CSA Scores?

TodaysTrucking.com cites the recent TCP survey to suggest, “not really.”

The number of shippers unconcerned by carrier CSA scores rose from 15% to 22% this quarter. Only 16% of shippers are reportedly concerned.

“We are at a loss to explain the increase in shippers not concerned. One possible explanation is that shippers simply do not use CSA scores as a determinant in choosing a carrier,” said Richard Mikes, TCP Partner.

It is likely that many shippers still do not believe CSA scores are an accurate reflection of carrier safety.

Read the full Today’s Trucking article here.

Rising Carrier Optimism

Desi Trucking relates that TCP’s third quarter survey results reflect similar sentiments from Ontario carriers in the 3rd quarter Ontario Trucking Association Business Expectations Survey.

In the OTA survey, motor carriers expressed more optimism and lowered uncertainty about the direction of the industry. In that survey, freight volumes as well as pricing continued to stabilize and/or appeared headed for growth.

TCP’s survey showed positive volume expectations are now up to 61% of carriers. Furthermore, a majority of carriers (66%) expect rates will increase over the next 12 months.

To read the Desi Trucking article, click here.

More Carriers Expecting Volume and Rate Growth

TruckingInfo.com cites TCP third quarter survey information in their September 24th article.

Since a low point of 50% in third quarter 2012, positive volume expectations are now at 61%. In the survey, larger carriers are considerably more optimistic than smaller carriers.

A majority of carriers also expect to see rates increase over the coming 12 months. Smaller carriers have often been the more optimistic about rates. But, in this survey, a greater percentage of larger carriers are anticipating rate increases (74% vs. 48%).

“Spot market trends over the summer have been positive for most carriers and this may be the precursor to continuing volume optimism,” stated TCP’s Richard Mikes.

To read the full article click here.

Carriers Upbeat on Volume and Rate Growth

Today’s Trucking shares data from the TCP third quarter industry survey in their recent article. The survey reveals more U.S. carriers expecting to see volumes and rates grow over the coming months.

“The stronger than expected volumes of the last few months are being reported by some carriers as boding well for the fourth quarter,” according to TCP partners.

However, the article also suggests that the “proof will be in the pudding.” The economic recovery and future projections are still modest. Thus, carriers are not yet seeing their optimism on volumes and rates reflected in actual rate growth.

TCP Partner, Richard Mikes, notes, “Underlying cost rate pressure is ongoing – from new truck costs and maintenance inflation to pinched driver efficiency, from HOS changes and inadequate carrier returns.”

Read the article here.