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U.S. Xpress Enterprises CEO Eric Fuller on Jan. 20 detailed the findings of an economic report his company did on the trucking industry.
The 2021 U.S. Xpress Economic Forecast highlighted several major trends for the year ahead. The report said there are expectations for a further reduction of truckload capacity, strong freight activity, rate increases and the impact of the coronavirus eventually being resolved.
“We’ll be coming out of this pandemic,” Fuller told Transport Topics. “Hopefully, at some point in 2021, there will be some semblance of normalcy. What that may look like is kind of still up for debate. What we saw in 2020 was a real shift in demand patterns, and it was really obviously related to social distancing.”
The report projects that fewer drivers and more stimulus funding will continue to reduce truckload capacity. A reduction in CDL training and other factors have resulted in far fewer drivers as the industry entered the new year. At the same time, stimulus spending also could dissuade new drivers from entering the industry while keeping many current drivers at home.
The report noted that the recent uptick in Class 8 orders suggests additional truckload capacity will be realized soon. It cited ACT Research, which found November orders increased 33% from the prior month. But the report warned that driver shortages will persist for the foreseeable future.
“We’ve also had the schools that were shut down for a period of time,” Fuller said. “Many schools didn’t reopen, and the ones that did reopen are operating at kind of a half capacity. So less drivers overall in the market from that perspective.
“The things that are on our radar from a supply perspective in 2021, related specifically to these spending bills, is the stimulus is likely to keep people from entering the industry.”
The report noted that freight activity will remain robust, but economic growth is expected to cool. It noted the pandemic and a slower-than-anticipated vaccination rollout will temper growth for the first half of the year. But inventory replenishment efforts, holiday shopping returns and e-commerce will help support freight demand.
Too, the report said that as coronavirus cases are anticipated to slow down, a more steady recovery will take place in the second half of the year.
“I think the big question going into 2021 from a demand perspective is how does that demand change,” Fuller said. “We believe that we’re probably likely to see the effects of the pandemic well into early to mid fall. But hopefully at some point into that time period, we start to have a little bit of a turn to some sort of normalcy.”
He added that the pandemic has created a big shift in buying patterns. People haven’t been able to dine out, enjoy entertainment or travel as much as before. That drove outsize demand for products such as groceries. Fuller anticipates at some point there will be a pendulum swing in demand back toward services and experiences.
U.S. Xpress also forecasts there will be continued contract and spot rate increases over the next year. The carrier expects the increased freight demand and reduced capacity will result in contract rates rising between 8% and 15%. Spot rates likely will trend upward until the fall months.
Fuller also noted there are political considerations. The Democrats gained the presidency and control of Congress, which means a new slate of priorities and likely increased spending. That could have wide-ranging repercussions for trucking.
“Along with the pandemic factors, you’ve got a couple of things that are going to probably play out over the next six months,” Fuller said. “One being a big stimulus bill. Now that the Democrats have control of both Congress and the presidency, you’re probably going see a big number attached to that stimulus bill. It could be in the trillions of dollars. It’s probably going to come with some big payments to consumers. That’s going to drive more buying power.”
Fuller added that will impact freight demand. He also sees a likelihood of a large infrastructure bill that could have an effect on demand closer to next year. Fuller also is hopeful that will be enough to offset any potential economic downturns later on.
U.S. Xpress ranks No. 24 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 31 on the Transport Topics Top 50 list of the largest logistics companies.
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