At the 2024 American Trucking Associations (ATA) Management Conference & Exhibition, Chief Economist Bob Costello shared his thoughts on where the trucking industry is headed. While the recovery won’t be fast, he believes the industry is slowly moving toward better days. Costello explained that trucking has faced challenges since the pandemic but could start returning to normal by 2025.
ATA Forecast: Freight Market Slowly Stabilizing
Costello said that even though the economy is slowing down, the trucking industry might see some improvements soon. He explained that freight demand has been low because consumers spent more money on experiences rather than goods after the pandemic. At the same time, manufacturing output dropped, which hurt freight volumes. However, manufacturing in sectors like electronics and transportation equipment is expected to grow next year, which could help freight levels improve.
Economic Slowdown and Its Impact on Trucking
Costello noted that the U.S. economy is growing more slowly, with third-quarter GDP expected to increase by 2.8%. Even though the economy has been doing well overall, trucking hasn’t benefited much. This is because the industry depends more on goods than services, and many people have been spending their money on things like travel rather than products.
The good news, according to Costello, is that this trend is starting to change. As people shift their spending back toward goods, it could drive more demand for freight services and help the trucking industry recover.
Interest Rates and Inflation: A Mixed Bag
High interest rates have made it harder for the housing and construction industries, which are important for trucking. While non-residential construction is still holding up, residential housing has slowed because mortgage rates remain high. The Federal Reserve has begun lowering interest rates, which could help the housing market recover, but Costello said it will take time for the positive effects to be felt.
Inflation is also slowing down, though it remains a concern. Prices have risen by 22% since 2020, which has put pressure on consumers. Although wages are increasing, higher costs are limiting how much people can spend, which impacts freight demand.
Capacity Challenges and the Role of Private Fleets
Costello explained that the trucking industry is dealing with too much capacity, which has slowed the recovery. Many private fleets expanded during the pandemic, taking market share from for-hire carriers. As a result, trucking companies have had to face lower rates and higher costs.
Even though some carriers have left the market—about 34,000 since late 2022—Costello said that more capacity still needs to exit before the industry can stabilize. He warned that more bankruptcies are likely as companies struggle to manage costs in a slow-growth environment.
Freight Demand Expected to Improve Gradually
Costello does not expect the trucking industry to experience rapid growth. Instead, he predicts a slow and steady recovery. The spot market is beginning to stabilize, and long-term contracts are showing signs of improvement. However, freight rates are still lower than they were before the pandemic, and the road to recovery will take time.
He also noted that if the economy improves faster than expected, the industry could face a return of the driver shortage, which has been a long-standing issue for trucking companies.
Near-Shoring and Political Climate Influence Freight
Costello pointed out that near-shoring—moving production closer to the U.S.—is becoming more common. Many companies are shifting manufacturing to Mexico, and a large portion of those goods are transported to the U.S. by truck. This trend could create new opportunities for the trucking industry.
He added that the upcoming U.S. presidential election is unlikely to have a major impact on the industry, as both candidates support near-shoring efforts. While political changes could influence the economy, Costello said the trucking industry’s recovery is more dependent on economic trends than politics.
ATA Forecast for 2025 and Beyond
Costello wrapped up his presentation with cautious optimism. He believes the trucking industry will slowly improve over the next year as freight demand increases and capacity adjusts. However, more carrier exits may be needed to balance the market.
While the road to recovery won’t be easy, the trucking industry seems to be on the right track. With demand drivers improving and capacity slowly adjusting, Costello expects conditions to get closer to normal by 2025.
John Major DavisOctober 17, 20243 Mins read382
