In The News
Cat economists: Freight may fall in â€˜08
A sluggish United States economy will keep freight to minimal if not negative growth in 2008, states a report by Caterpillarâ€™s economists.
FCC Equipment Financing Inc., a subsidiary of Caterpillar Financial Services Corp., has released a transportation industry report produced by Caterpillar economists giving projections for the North American transportation industry for this year.
â€œThe United States economy is expected to continue to grow below trend in 2008,â€ the report stated. â€œGross Domestic Product has grown less than 3% in six of the past nine quarters, causing the annual average growth rate to be below the 3.3% long-term trend since the second quarter of 2005. U.S. GDP will grow 2.2% in 2007â€¦With many industries that lead the economy in decline and no clear sign of imminent and significant monetary stimulus, we expect the U.S. economy to grow only 1.5% in 2008.â€
Transportation has also been affected by several issues keeping the level of freight stagnant. Driver shortages, the price of oilâ€”which has more than quadrupled in the past six years, according to the American Transportation Research Institute (ATRI)â€”and increased congestion has led to decreased cargo.
â€œThe implication for the trucking industry is that freight will be flat to down about 1% in 2008,â€ the report stated. â€œBoth the American Trucking Associations Tonnage Index and the broader Freight Transportation Services Index are down 2.2% so far this year. Freight rates and carrier profits are under pressure as capacity increased in 2006 and freight demand has not.â€
Commenting on the report, Chris Brady, president of Commercial Motor Vehicle Consulting, told FleetOwner that â€œflat to down 1% is reasonableâ€¦Consumer spending is going to be really sluggish in â€™08.â€
However, Brady added that some segments of freightâ€”especially building materials--will be down considerably more than 1%. On the positive side, exports are growing, he said.
The report, titled "FCC 2008 Economic Insight: An Annual Outlook on the Transportation Industry," also projects that new heavy-duty vehicle purchases will rebound slightly, up to about 140,000 vehicles in 2008 compared to 135,000 in 2007, mostly due to replacement as many carriers will age-out equipment rather than purchase new vehicles, the report said.
The medium-duty forecast is less promising. â€œDemand for midrange trucks will be down about 17% in 2007 with about 120,000 vehicles purchased,â€ the report said. â€œIn 2008, we expect demand to be down another 10% from 2007 levels at 108,000 vehicles. Continued weakness in the housing sector will decrease demand for construction-related vehicles, and slower economic growth will put pressure on corporate profits, discouraging purchases of new delivery vehicles.â€