Costello: Future for US Truck Fleets Positive Despite Current Recession

The keynote speaker at TIA's Commercial Tire and Retread Conference was Bob Costello, Chief Economist and Vice President for the American Truckers Association (ATA). Costello, who has a knack for making the dry subject of economics interesting, gave TIA members an update on the state of the US economy, an analysis of the effects of the current recession and some prognoses for the future. Although Costello painted a gloomy picture of the current state of the economy, his forecast for the medium and long-term prospects of the truck fleet sector was much more upbeat. The US economy, he said, was unlikely to see any growth until the fourth quarter of 2009.

Indeed, the first quarter of 2009 was likely to show a 6% decline, following on form a nearly 4% decline in the fourth quarter of 2008.. "The current figures portray the worst reading of GDP since 1945", he said. Costello also forecast the first annual drop in prices since 1955 (2%) although this, he said, was due largely to a correction in commodity prices and was therefore likely to be a one-off development. Unemployment in the US is also on the increase and according to Costello, this is likely to reach 10% before it improves, although he did forecast unemployment to peak in 2010.

The latest figures for the US trucking sector also make grim reading. At the end of 2008 the ATA's for-hire truck tonnage index fell 16.2% from peak to trough with further falls expected. This compares to a total 9.3% drop during the 1999 recession. In the meantime the number of loads fell by as much as 23.2%. The flatbed sector was the worst hit (down 29%) followed by tank (25%) and Dry Van (also 25%). Reefer freight was less badly hit (down 8%).

As a result of the fall in demand, competition in the freight sector has become intense at the moment. However, Costello forecasts that truck capacity will tighten fairly quickly once recovery commences. In the long term Costello's view was that truck capacity will remain tight due to driver shortages.

Despite the current crisis, Costello suggested that the future for the trucking sector was bright and that about 70% of total freight would be carried by trucks by 2018. The total commercial fleet size could be expected to increase by as much as 26% by that date he forecast, with tractor/trailer units up by 6.5%.

Issue 2009/1