Truckload rates strong at 2011′s end
March 9, 2012
Truckload pricing came in slightly above expectations to end 2011. December saw a year-over-year gain of 5.3%. Year-over-year growth has been above 5% for 13 of the last 14 months. Truck pricing had a slight deceleration during the fourth quarter of 2011, but still tracked near the 5% growth rate that we have been at or above since late 2010.
The fuel price situation will determine whether 2012 is a year of dramatic or merely substantial price increases. Before fuel, rates will come in above 6%, more than twice the rate of inflation. This could be higher if the economy accelerates. The recent diesel price increases will bring the first quarter run rate over 10% for full prices. Our current forecast assumes some moderation in political pressure and only modest further increases, with diesel prices maxing out near $4.20/gal and then falling back towards $4.
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 5.9% in 2012 (up slightly from 5.5% in our prior forecast), followed by a strong 7.3% in 2013 (previously 8.1%) and further acceleration to 8.6% in 2014. The strength in 2013/2014 is due to the inclusion of the HOS rules. That will help move pricing higher until at least mid-2014. The lowering of our driver shortage estimates led to the easing of the 2013 rate growth.
Continued freight acceleration over 2011 will push prices up moderately. There is an increasing possibility of strong upside pressure from fuel prices. Pressure on most cost elements will keep rate increases above inflation in 2012. The prime exposure is upward from fuel “politics.”
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 pushed rates higher, up 10.2%. The recent fuel price gains have moved our forecast for 2012 higher. We are now at 6.1% in 2012, 6.5% in 2013 and 8.2% in 2014.
The current capacity utilization level is enough to sustain well-above-inflation rate increases. Pressure will increase substantially in 2013, when HOS regulations change. Note that political troubles in the Middle East will cause short-run spikes in prices with fuel. One such spike is occurring right now.
Excepting early 2011, fuel prices and freight growth have not moved together during this upturn. As one slows, the other accelerates. This is, so far, in contrast to the situation during the last upturn when freight growth, fuel pricing, and regulatory drag all moved upward together in 2004 and 2005.
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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