Truck utilization stays near 95% in July

Capacity utilization is at a normal level for mid-recovery and has remained virtually unchanged for the last few months. After easing some during much of 2011, fleet utilization improved in early 2012 and has held steady since then. There is just enough freight growth to hold capacity utilization in the 95% range, surprisingly high given the sluggish economic conditions. Fleets continue to manage capacity very closely. FTR’s estimate of truck utilization was up just 0.1% in July, standing at 95.1%.

Outlook
Capacity utilization will stay in the strong, but not critical, 95% range until HOS implementation in 2013. The levels for 2012 should be high enough to create some additional price pressure, but the recent weakness in pricing indicates that slack economic conditions are enough to offset the high utilization. The peak conditions for this recovery will likely occur in 2013, when the changes to Hours-of-Service regulations come into effect.

We expect to stay near the 95% level until the end of this year with no dramatic escalation until HOS implementation in mid-2013. This will pull capacity significantly tighter over the second half of 2013 and will keep it elevated through most of 2014. Utilization will approach the 100% mark by the latter half of 2013 – a level that indicates capacity shortages could occur.

This will be an event to watch because as we approach 100% the market will have to prepare for potential capacity shortages. We have previously noted that our chances for widespread capacity shortages have lessened, but they are still possible in certain lanes and types of freight.

Analysis
Capacity utilization is at a normal level for mid-recovery, and should stay at those levels until the introduction of new HOS regulations next year. Note that it stays at this relatively high level due to very conservative capacity additions in most industry segments.

The conservative capacity management by trucking managers is being reflected in the slowing orders for new trucks. Lack of capacity growth, combined with only modest increases in freight demand, will keep capacity utilization steady through early 2013.

The 2013 HOS changes will push capacity utilization near the same levels as in the 2004 crisis. Barring a recession, capacity will stay tight longer this time due to more regulatory change. Changes to the expected pace of economic growth or a delay in HOS implementation are the keys to changing our outlook.

While we 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.

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.