Symposium: Silver Linings Logbook

There are substantial “silver linings” to the historically slow economic recovery and, perhaps in the short term at least,  the driver shortage and other ascending costs, an industry economist told fleet executives and suppliers at the CCJ Fall Symposium on Friday.

As reported by CCJ, Jim Meil, principle of industry analysis for ACT Research, explained the economy’s slow growth will prove to be sustainable for several more years.

Meil forecasts GDP growth will surge to 3.4 percent (up from 2.2 percent this year) and create a 5.3 percent gain in freight, after 2014 slipped to 3.3 percent growth, hampered by winter weather and a slow housing market. The rest of the decade should be “pretty good” as well, expected to average about 4 percent freight growth.

“This is the picture of an industry that – if the forecast comes through – will see ongoing prosperity,” Meil says.

Carriers’ handling of the productivity challenges from hours-of-service rule changes all have contributed to a shift in “the balance of power between truckers and shippers” and, consequently, to rising rates, he added.  “The good news is that carrier profits have been consistently strong,” Meil says. “And we think the strong profit results are sustainable as we close out this year and move into 2015.”

This isn’t to say that trucking doesn’t face challenges, although he pointed out in his “slightly contrarian” view, the key challenges of the current decade do come with some upsides – at least in the near term.

“The driver shortage is, without doubt, the number one operational challenge for many people in this room,” he says, but it’s also led to robust pricing and less volatility in recent years. “Which would you rather have: not enough freight, or not enough drivers?” he asks rhetorically.

Unlike prices or the economy, the driver shortage is “actionable” by supply chain management, he added. And for most freight currently hauled by truck, “there isn’t a practical alternative mode.”

“It comes with the territory: Freight is there, freight needs to be moved, profitability is good – but it does make the driver issue emerge,” he says.

The answer, he suggested, is higher pay and better lifestyle options for drivers. He also noted that carriers are turning to the private-fleet pay model and emphasizing performance-based pay.

“The good news is that, if you have a successful operation – if you know your way around the minefield and the danger spots – your prospect for profitability is probably better than ever.”

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