Editorial: Caution as Freight Volumes Decline

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reight volumes have now fallen in three of the past four months, according to ATA’s Truck Tonnage Index, including a 3.3% dip in the recently released March numbers.

These numbers underline what carrier executives have been saying for many weeks: Business is still pretty good, but volumes are declining from the hectic expansion during most of 2004.

It now appears that those analysts who predicted a slackening of the nation’s economic growth were right, even if their timing was off a bit. The slowdown came a little sooner than many expected.

Many experts are now saying the run-up in fuel prices took some steam out of the nation’s economic vitality, causing a dip in consumer buying, which in turn led to a drop in production.

The decline in freight volume validates a new wisdom generally exhibited by the trucking industry: Be conservative in expanding capacity. Fleets that were burned in the last economic boom-and-bust cycle have been showing much more restraint this time around, waiting for proof that increases in demand are long-term ones and not momentary spikes.

Meanwhile, the flood of good news from fleets reporting their quarterly results continued last week, when many companies posted steep increases in profitability.

But many of the reports were coupled with cautious words about coming quarters, with several executives saying there had been a notable dip in shipper demand.

Add this economic uncertainty to sky-high fuel prices, the escalating cost of new trucks, the shortage of qualified drivers and the federal pollution mandates that require new and more expensive equipment, and it’s clear why executives such as Scott Arves, president of Schneider National’s transportation unit, are warning shippers not to expect any major increases in fleet capacity anytime soon.

Rather, Arves told shippers at a conference in Washington last month, they should expect to see freight rates increase between 4% and 7% this year, around the same increases as in 2004.

In all, it appears that the industry and its supplier community learned some lessons from the bust that followed the boom years at the end of the 20th century, and are applying discipline to their expansion plans. In the end, the fleets, as well as their suppliers and their shippers, will be better off as a result of this caution.

This story appeared in the May 2 print edition of Transport Topics. Subscribe today.