The U.S. economy will accelerate during the remainder of this year after a tough first quarter, but rising operating costs will continue to limit fleets’ profitability, according to the latest forecast from the chief economist at American Trucking Associations.
Bob Costello said the economy has been seen only “subpar growth” in the years since the recession ended, but it is poised for significant expansion.
“I think we’re going to start to buck that trend,” Costello said.
He called for gross domestic product to grow by an annualized rate of 3.5% in the second quarter, followed by 3.1% and 3% growth rates in the third and fourth quarters.
If that comes to fruition, it would be the first time that GDP has grown by 3% or better in three consecutive quarters since the second half of 2004 and the first quarter of 2005.
That forecast also is a departure from the first quarter, during which GDP contracted by 1% due in large part to harsh winter weather and inventory reductions.
Costello said the freight market also will continue to expand.
He projected that truck tonnage will increase 4.5% this year after a 6.3% increase in 2013 and 2.3% growth in 2012. Truckload loads will rise 2.5%, and less-than-truckload shipments will increase 3.5% in 2014, he said.
One key sector providing a boost to the economy is the housing market.
Costello projected that housing starts will rise to 1.06 million this year, topping 1 million for the first time since 2007, and grow to 1.37 million in 2015.
Although the housing sector is “growing nicely,” total housing starts still are relatively low compared with historical levels, he said. “We’re still just getting back to the low points of other cycles.”
Costello said factory output will continue to improve as well.
He forecast that year-over-year growth will rise from 3.1% this year to 3.7% in 2015.
“I remain bullish in the long run on the factory sector,” Costello said, citing productivity improvement driven by upgraded machinery and robotics.
Despite the increase in freight demand, fleet profitability still has not returned to pre-recession levels, he said.
Revenue per truck per month has been stagnant in recent years, currently averaging $15,210 for truckload carriers in 2014 through April, he said. Meanwhile, average miles per truck per month continue to be “soft” at 7,915.
Costello said the driver shortage, the rising cost of equipment and the effects of regulations are constraining fleets’ earnings.
These rising costs could contribute to a higher number of fleet failures, he added.