Truckload rates growth below 5%
February 14, 2012
Truckload pricing slowed towards the end of the year, coming in modestly below our expectations. October’s year-over-year gain was only 4.4%, but November rebounded some and had a 5.4% gain. Initial estimates are showing that December will likely track close to November’s gain. This indicates a slight deceleration during the fourth quarter of 2011, but is still near the 5% growth rate that we have been at or above since late 2010.
Outlook remains strong
After dropping 10.9% in 2009, industry rates (excluding fuel surcharges) rose 4.4% in 2010. The rebound continued in 2011 with growth of 5.8%. Rate growth will stay strong through 2014 – barring an economic downturn. We anticipate seeing growth of 5.5% in 2012 (down from 6.5% in our prior forecast), followed by a strong 8.1% in 2013 (previously 7.0%). The strength in 2013 is due to the inclusion of the HOS rules. That will help move pricing higher until at least mid-2014. Even if the regulations aren’t implemented we still anticipate seeing a 5% growth rate for the next several years – until the economic cycle turns down.
If you add in the fuel component, we saw rates drop 17.8% in 2009 and then rebound 7.5% in 2010. The spike in fuel costs in early 2011 will push rates higher, up more than 10%, before slowing down to grow 5.5% in 2012 and 7.4% in 2013.
We have downgraded our early 2012 forecast considerably. Some of it is due to the weaker end to 2011. Part of it stems from the lack of HOS implementation until mid-2013. Rates in the fourth quarter were slightly higher than during Q3, on a seasonally-adjusted basis. Rates rose rapidly during Q4 of 2010 and Q1 of 2011 – and even into Q2. They then leveled off for the rest of the year. We are seeing the effects of that rapid run-up in the moderating year-over-year growth in Q4 of 2011 – and the moderation will continue into Q1 and Q2 of 2012.
Moderating fuel prices are helping to reduce shippers ‘all-in’ year-over-year rate increases. Fuel has remained in a relatively tight band since last March. We don’t expect prices to move significantly outside of that band during 2012. Other costs are expected to begin accelerating in 2012 as new, expensive equipment makes up more of the fleet, and as labor shortages increase driver pay. Any major upside to rates will likely wait until HOS is implemented in mid-2013.
We anticipate that rates will run near a 5% year-over-year rate until the regulatory impacts finally come. As noted in other posts, the actual start of these regulations will not come until at least 2013, or later. They are currently scheduled for mid-2013. When, or if, these rules come into play then pricing growth will start to accelerate again. We continue to anticipate a strong pricing environment for the next 2 or 3 years. Even absent the regulatory impacts pricing would still remain near the 5% mark for the foreseeable future – a more mild, yet reasonable, operating environment.
Despite the mild economic recovery we still remain bullish on transport pricing. Why? The quick answer lies in the driver issue. Even with the mild economic recovery that we are currently in, the driver shortage is nearly 200,000. If the economy stayed slow for the next year we would probably start to move back to equilibrium. That is if we didn’t have a new wave of federal regulations coming into effect during 2013. If it occurs it could affect the driver supply by more than 300,000 drivers. That keeps more than enough of a market shortage to keep rates strong even in a soft economy.
Our truckload rates data is based on publically-available data from security analysts and trade organizations. We then forecast the cost and margin elements, factoring in inflation and industry conditions. The figures are for rate-per-loaded-mile (less fuel surcharge), seasonally adjusted and are indexed to 2003Q1.
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