LAS VEGAS — Truckload carriers and freight brokers should see improved profits in late 2017 and early 2018, but FTR economist Noël Perry warned executives at the Transportation Intermediaries Association that they won’t be as robust as earlier this decade and a recession could be looming.
The recovery since 2009 has been among the weakest in American history, based on the annualized rate of growth in gross domestic product. The main contributor to current economic growth is consumer spending, rather than construction, auto sales, or other heavy equipment and materials, according to Perry.
“We’re not going to be as bad [this year] as ’15 and ’16. We’re gonna go back up to some reasonable growth, but we’re not gonna get the strong growth that made us all so happy earlier in the recovery,” he said in his short-term forecast through mid-2018. Perry predicted that the fourth quarter of 2017 and the first two quarters of 2018 would feel like 2014, with spot market rates up more than 5% and maybe even double-digits overall.
However, his forecast over the next three to five years has the economy facing another recession. He predicted GDP would grow in 2017 at more than 2% and less than 3%. However, he said it’s unlikely that the American economy will increase at least 2% every year through 2020.
“In your three-year plan, you need to have a contingency plan to deal with recession. Recession means that prices are down 6% to 7% and volumes are down by the same,” Perry said. “Don’t declare victory if ’17 is a great year. You still have the same risk of recession over the next few years as if the economy were slowing. ... I’m not depressed anymore about ’17; I’m more optimistic. But I’m very cautious about ’18 and ’19.”
Perry also discussed how he thought technology would change the transportation and logistics industry between 2020 and 2030. He said technology will make carriers more visible to brokers, shippers and even those receiving freight. But he also predicted that automated trucking will eliminate the productivity limitations of the hours-of-service rule because a truck would operate 24 hours per day without a rest break.
He also said the trade deficit would be diminished or eliminated because manufacturers will insource the supply chain when automation lowers production costs to the same as an overseas market.
As a result of automation, truck prices will drop, productivity will rise and third-party logistics providers will have to concentrate on how to provide value for their services to remain profitable and relevant to their clients. Perry said not all TIA members will survive, only those who figure out a way to use technology to double or triple the quality of their service by seamlessly integrating technology into their business model and adapting strategies to the changing retail marketplace.