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Trucking to face challenges in 2019, but it’s not necessarily bad, analyst says

Posted: January 30, 2019 by Denise Rondini

LAS VEGAS, Nev. — The economic activity affecting trucking could see a challenging year, according to Bob Dieli, president and founder of RDLB — an economic research and management consulting firm.

But in a presentation during the annual Heavy Duty Aftermarket Dialogue, Dieli was quick to add that challenging does not necessarily mean bad.

Dieli expects supply chain issues to dominate in part because of trade and tariffs matters, but also because of structural issues that already exist inside the industry.

Last year his top concerns focused on government actions. This year, he has concerns about the investment, export, and import sectors. He believes these factors could put as much as 50% of Truckable Economic Activity (TEA) — a measure established by MacKay and Company — at risk.

The concern with exports is illustrated by what happened when the U.S. imposed a 10% tariff on steel from China. China then imposed a 25% retaliatory tariff on soybeans. China was a major market for U.S. soybean imports. On average, food exports account for 10% of total exports. In addition, imports of nonautomotive consumer goods account for 25% of “truckable” imports.

There is also a concern that a large inventory of imported goods has been built up. “How much is a pre-buy because of tariffs? How much is unsold because of tariffs?” he asked.

Residential structures are another area of concern, and they represent 25% of truckable fixed investment.

Jobs and trucks are good economic forecasting tools, Dieli said. “Drivers are hired when there is freight to be hauled, with rise in freight volume is rise in transportation employment.” And, he added, “Trucks are purchased when there is freight to be hauled.”

Based on what he is seeing, Dieli also said we are we are in the boom phase of the business cycle. During the boom phase, the economy continues to expand. However often in the boom phase of an economic cycle, employment levels will fall. A typical economic cycle is expansion, boom, peak, trough, recovery, and expansion.

He suggested that meeting attendees ask themselves these three questions during the boom phase:

  • Stability — How is your biggest customer doing? If they are having a problem, you, too, are going to have a problem.
  • Sustainability — How is your biggest supplier doing? Are they impacted by tariffs?
  • Hostility — How is your biggest competitor doing? He told attendees to figure out who their biggest competitors are, look at what they are doing, and make sure to understand the competitive environment.

“For 2019 TEA looks to be challenging, but not necessarily bad,” he said.

Supply chain issues will also be a factor and will impact who moves freight, where it originates, and what it costs to ship it.

And the industry will also feel the impact of some structural issues like hours of service, the electronic logging device mandate, and a changing CSA program. “These are issues that have to do with how the industry works,” Dieli explains.

 

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