Truck utilization lower, still tight

The capacity situation continues to remain tight, but not critical. HOS implementation in mid-2013 will be a game-changer for that. FTR’s estimate of truck utilization rose slightly in January, to 95.0%, from a downwardly revised December reading of 94.7%. The historical average is ~90% so we are in a tight capacity environment. Capacity utilization will stay in the strong, but not critical, 95% range until HOS implementation in 2013.

NOTE: We are continuously updating and improving our data and calculations so that we can present you the best insights and analysis available. To that end we have updated our historical data to better reflect the wide swings in economic activity that occurred during the Great Recession and the ensuing recovery. You will notice substantial changes to our data this month. To find out what those changes were and how they affect our outlook for the industry click here. (http://www.truckgauge.com/2012/02/22/freight-calibration-what-the-data-revealed-and-what-it-means-for-trucking/)

Revision
An after effect of our changes to the historical freight data is that it also impacts our capacity utilization estimates. You may notice sizable changes from our data from last month. The key points are that utilization did not fall quite as dramatically in early 2009, nor did it rebound as strongly in early 2010. Wide swings in output are what tends to drive big changes in the utilization. We have removed much of that volatility in the freight data. Our current estimates are also slightly lower in the near-term than previously stated. They still remain in the solidly tight, but not critical, range that we have been assuming for the last year.

The reduction in the wide swings of utilization means that we are better situated to handle the upcoming HOS implementation than previously understood. We still anticipate that we will get into near-full utilization, but the prospects for industry-wide capacity shortages are lessened.

Outlook
While we finally have a known date and ruling on HOS, including it in the forecast is still an educated guess of sorts –we don’t like to try and guess what politicians or lawyers will do. We do know that capacity will likely stay near its current level (~95%) until the economy changes pace or the HOS rules are finally in place.

Our forecast calls for utilization to remain near 95% for most of 2012 before moving modestly higher at the end of 2012 and beginning of 2013 in preparation of full HOS implementation. Once the HOS rules are implemented utilization will quickly approach 100%. It will remain at this level into 2014. This will be an event to watch because as we approach 100% the market will have to prepare for potential capacity shortages. As noted above our chances for wide capacity shortages have lessened, but they are still possible in certain lanes and types of freight. It is time to prepare for that possibility.

Analysis
Utilization is currently stable and moderately tight, although freight revisions have moved the level modestly lower. Although the 2013 HOS changes are less than expected, their implementation in a year full of other regulatory pressures will push capacity utilization to the same levels as in the 2004 crisis. Barring a recession capacity will stay tight longer this time due to more regulatory change.

Utilization started rebounding at the end of 2009 and moved higher through the end of 2010. It has remained relatively unchanged since then. Slowing capacity growth is just offsetting modest demand and regulatory drag. Our forecast accounts for the July 2013 anticipated implementation of HOS rules. Changes to the expected pace of economic growth or a delay in HOS implementation are the keys to changing our outlook.

NOTE:
FTR’s Active Truck Utilization metric calculates the percentage of the population of active trucks that is required to move the U.S. truck freight. In general, a figure above 95% indicates a tight market where the majority of the truck population is at work. A figure below 90% indicates a weak market where a significant portion of the truck population is idle.