two construction trucks
Essential movers // Encouraging activity levels for motor freight and logistics
This spring, ahead of shelter-in-place orders, Americans found that once-reliable household staples like paper products, disinfecting wipes, dried pasta and canned beans were suddenly difficult to track down. Although disinfecting wipes remain scarce, the other items were restocked in fairly short order, thanks to hardworking front-line workers, including truck drivers. “The business impact of COVID-19 has varied significantly from one trucking company to the next,” according to Transport Topics, with fleet owners describing a range of experiences from steady volumes and upticks in demand to downturns.
Highs and lows
The fits-and-starts nature of the recovery following the initial pandemic shock is mirrored in the freight statistics. Although the American Trucking Associations’ seasonally adjusted For-Hire Truck Tonnage surged 8.9 percent in June—the best month since January 2013, according to comments from ATA Chief Economist Bob Costello—it followed that up with a decrease of 5.1 percent in July.

“After a very strong June, for-hire contract freight tonnage, which dominates ATA’s index, slipped in July,” Costello said. “It is likely that tonnage was down because many fleets didn’t have the capacity to take advantage of stronger retail freight volumes. Therefore, much of that overflow freight moved to the spot market, which did increase in July.”

Other ATA data shows that for-hire truckload fleets were operating 3 percent fewer trucks this summer than a year earlier, “so it can be difficult to take on a significant amount of additional freight,” Costello says. While retail volumes snapped back strongly, manufacturing output and international trade freight lags.

FTR’s Shippers Update—which tracks four modal options: truckload, less-than-truckload, intermodal and rail carload—also weakened in June. However, FTR expects stronger conditions to return in upcoming months.

“Spot tightness in the trucking market and surging domestic intermodal volumes put downward pressure on the index. Through the balance of the year, uncertainty remains high, but FTR expects a positive environment for shippers through the end of 2020,” says Todd Tranausky, vice president of rail and intermodal at FTR.

One concern still is that freight could slow if states reinstate restrictions due to increasing COVID-19 numbers. However, Steve Tam, vice president at ACT Research, points out that the “current economic slowdown is largely driven by a dramatic reduction in spending on services,” which makes the situation different from other recent downturns. “Freight continues to move, albeit at a somewhat lower pace.”

The right direction
In the August 2020 Commercial Truck Guidelines Industry Update, analysts from J.D. Power Valuation Services reported that Class 8 conditions across the board were generally stabilizing in July, suggesting June’s recovery was not solely based on pent-up demand.

Preliminary used Class 8 volumes (same-dealer sales) grew 16 percent month over month in July, according to the latest preliminary release of the “State of the Industry: U.S. Classes 3-8 Used Trucks,” published by ACT Research. Longer-term, volumes rose 48 percent compared to July 2019 and were up 7 percent when measured against the first seven months of last year.

The truck industry is a bit of a canary in the coal mine for the U.S. economy, and there are several factors beyond COVID-19 that could have an effect on commercial vehicles, although Tam says that “until we have a permanent cure for, or way to control, the coronavirus outbreak, that will remain the biggest risk to the commercial vehicle forecast in the short and long term.”

He says it’s important to be cognizant of the other risks in the business environment that “are easy to overlook because of the prominence of COVID. One obvious threat is the increasingly tense bilateral relationship of the U.S. and China, and another is the outcome of November’s election.”

The upside, though, comes in promising levels of activity in goods-producing and goods-distribution industries.

“Pricing is solidifying, customers are buying more used trucks and new truck orders and deliveries are heading back in the right direction,” says Chris Visser, commercial truck senior analyst at J.D. Power ValuationServices. “When a massive black swan event blows up everyone’s forecasting models, the human gut becomes the main driver of decisions. Fleets waited to see what would happen to freight volumes once the stockpiling effect shook out, and they seem to be OK with what they are seeing.”

Lauren Duensing