Editorial: No Quick U-Turn for Trucking Slump

While we are cheered that the Federal Reserve cut U.S. interest rates again last week, and that President Bush unveiled proposals to deal with the country’s pressing energy needs, we cannot forget that many serious problems remain facing the trucking industry.

More action is needed on interest rates, energy resources and tax reductions before we can expect that trucking and its related industries will be on the mend.

As reported elsewhere in our pages, diesel fuel prices surged another 2.1 cents per gallon last week, while gasoline edged up to another record. That takes more money from truck drivers or their companies just to keep operating at the same level, and makes it harder for consumers to buy more goods for trucks to haul.

The Fed cut short-term rates another half a point, its fifth such move this year. Those cuts no doubt have helped the economy avoid an even rougher patch, but the Fed signaled that more cuts may come partly because business spending remains too weak.

The weak pace of capital spending is very evident for truckers hauling business equipment, and for suppliers of equipment to truck fleets. The latest sales report on large commercial trucks showed another setback from this time last year, and the pain continues to spread as well among original-equipment suppliers to the trucking industry.

Freight haulers at a recent industry outlook conference sponsored by an investment company complained that the broader economy continues to move through a trough, and some said the slowdown may not even have bottomed out yet.

Clearly, the U.S. factory sector has not bottomed out, and factories supply much of the freight that trucks haul. Until factory output picks up again, freight shipments will remain weak. Tax relief, in the form of both short-term spending money and long-term cuts in personal and business taxes, is still making its way through Congress — steadily but all too slowly to offset the damage still spreading right now.

Right now, every spike in costs of motor fuel, natural gas and electricity simply burns away some of that extra money the Fed is creating to spur the economy. Tax relief will help some when it gets here, but it is not here yet.

The Fed has cut interest rates, the administration is moving on an energy plan, and tax cuts are coming. These are all welcome developments, but are no final fix. Trucking is not out of the woods. The slump is not over.

This story appeared in the May 21 print edition of Transport Topics. Subscribe today.

7292