TORONTO – Expectations for business conditions in trucking remain buoyant despite recent freight market weakness on both sides of the border, ever-tightening capacity, higher wage costs and unprecedented prices for new equipment and maintenance.

That’s according the Ontario Trucking Association’s second quarter 2015 business conditions survey, which covers carriers’ experiences and forecasts for Intra-Ontario, inter-provincial, southbound U.S. and northbound U.S. freight lanes.

It shows intra-Ontario freight volumes took a steep tumble, as nearly half of the carriers reported volume increases in the previous three months compared to carriers in the fourth quarter 2014 survey, 25% versus 47%. This is the first time in 18 months that less than 30% of carriers reported volume improvements.

Sixty-seven percent of carriers reported no change.

Intra-provincially, 36% of carriers indicated increased volumes, nearly half of the 60% who said the same thing exactly a year ago.

“The year-to-year drop isn’t so surprising considering last winter’s volumes in early 2014 were inflated as a result of deferred bad weather-related shipments,” OTA said in a news release. “That said, early indications of a ‘spring peak’ season don’t appear to be reflected in these responses.”

The survey also revealed U.S. southbound volumes also slid as only 27% of carriers reported increases, compared to 55% and 65% of carriers in the previous two quarterly surveys.

That mark is the lowest since the fourth quarter of 2013 and the first back-to-back drop since second quarter of 2013.

Northbound U.S. volumes were relatively unchanged from the last survey.

“Again, like in Canada, the sharp downturn could indicate a return to normalcy during what’s traditionally a slow opening quarter, but it’s also true that the U.S. economy slowed to a crawl with gross domestic product growth receding to 0.2% in the first quarter of 2015 compared to 2.2% consistently throughout most of 2014,” said OTA.

According to the group, another possible sign that recently depressed volumes aren’t immediately alarming to carriers is that their expectations don’t appear to have been significantly dampened going forward.

Within Ontario, the projection that volumes would be improving over the next six months was expressed by 54% of carriers, up from 29% in the last survey, and in line with the 63% from this time last year. Not a single respondent thinks volumes will decline.

Intra provincially, 50% predict volume escalation, up from 40% from in the fourth quarter of 2014, but down 20 percent points from a year ago.

Interestingly, the sudden drop experienced in recent southbound volumes isn’t reflected in carriers’ outlook for the balance of 2015 as 50% expect increases and 45% say levels will stay balanced, according to OTA.

Only 5% thought volumes would continue to plunge.

The rate of carriers that expect increases in northbound U.S. was down more than half, from 33% to 14%. Seventy-three percent said things should remain unchanged in this lane.

Fewer Expect Rate Hikes

When it comes to rates, not surprisingly, lower expectations for pricing within Canada reflected the softened volumes of the last three months. However, the decline was comparatively modest and near-term rate expectations remain in line with the recent trend of robust pricing.

Within Ontario, 33% expect rate hikes over the next six months, 12 percentage points lower than the record high seen in the final quarter of 2014 when it was 45%, but still the second highest ever recorded.

Intra-provincially, the number of carriers forecasting higher rates fell from 47% to 36%, which is still three times more than those who said the same in final quarter of 2013.

“Interestingly, U.S. lanes painted to a different picture,” said OTA. “Despite economic stagnation south of the border to start the year, 55% of Ontario carriers actually said southbound U.S. rates are set to rise, a view that’s 10 percentage points higher than the previous survey and almost double of the fourth quarter of 2013.”

Those who think rates will sink only increased from 3% to 10%.

For northbound freight, 41% also expect increases of 6% or greater, tied for the highest level in three years.

Capacity Expected to Remain Tight

According to respondents, there isn’t going to be any relief in capacity anytime soon.

A meager 8% of carriers think capacity will increase, a whopping 19-point drop from fourth quarter of 2014 and the lowest ever recorded by OTA.

Meanwhile, 38% said capacity would tighten while 54% expect no change.

Over the next six months, again, a record-low of 8% expect a boost in capacity with 42% predicting less availability.

“Once again, despite the crunch, there’s little change in shippers’ willingness to lock in capacity by lengthening contract timeframes,” said OTA. “Meantime, 56% of carriers continue to say they plan to add drivers in the short-term, although the rate has hardly budged below or beyond the 45%-60% window for nearly two years.”

Carriers Continue Struggling with Costs

Although the business of trucking has been relatively buoyant since the end of 2012, according to OTA, carriers continue to struggle to keep up with rising costs.

“It’s apparent the added emission controls and safety technology in new generation trucks has propelled prices upward since 2010,” said OTA. “But in this survey, likely as a result of the widened gap between the Canadian and U.S. dollars, a whopping 24% of carriers said purchase prices have jumped by 20% or more, the first time ever respondents reported more than a single-digit increase in equipment costs.”

Sixty-two percent cited purchase prices in the 5-15% range.

On a related note, 83% of carriers report higher maintenance costs as equipment becomes more technically complicated and expensive to repair.

Meanwhile, in a bid to retain and attract more truck drivers, fleets also continue to raise wages.

For the first time, every carrier surveyed reported giving raises to drivers, with 92% indicating a 2%-5% increases, and 8% saying they increased wages by 10% or more.

Top Carrier Concerns

This survey also revealed the driver shortage remains the top concern for carriers, according to 50% of the respondents, down from 55% in the previous survey.

Capacity/rates was the second-highest concern by 38% of those surveyed, up from 21% in the previous quarter.

Only 13% stated the economy was their number one reason for alarm, a fraction of the 50% of carriers who expressed anxiety over markets at the end of 2012.