The devastating super-storm that blasted the North Atlantic in late October may provide a silver lining for the trucking and freight rail industries.
In a webinar Thursday, Noel Perry, senior consultant for the transportation analyst FTR Associates, said the recovery effort from Sandy will likely be a boon to trucking and intermodal companies that participate in the recovery efforts.
“Transportation is about 5 percent of our economy,” he said during FTR’s State of Freight webinar. “The Sandy rebuilding effort is projected to be around $100 billion. This type of recovery is transportation intensive, so we can expect around a $10 billion bump.
“Natural disasters in highly developed economies are good things for economic activity because these economies are organized and money is spent that wouldn’t ordinarily be spent.”
Perry said the peak of the recovery may come between March and May, when temperatures are warmer, though the more moderate climate along the coast may mean some of the benefit to the trucking and rail industries comes sooner.
“Trucking and rail revenues will benefit from Sandy,” he said. “You’re not only doing extra work, but you’re doing rush work and out of network work, and people are willing to pay more.”
Perry estimated that the truckload sector could see a 20 percent bounce in the fourth quarter because of the recovery efforts. Or if the work gets pushed back, truckload could see a record first quarter next year.
The benefits won’t just be confined to trucking, despite its flexibility advantages over rail.
“For intermodal, the good thing about this event is that it happened right on top of the eastern terminus of the great intermodal network,” he said. “This one is suited to inbound intermodal. Operators can come right up to the great hubs in Harrisburg/Allentown and north New Jersey.”
On the broader economic front, Perry said the U.S. economy is showing some subtle signs of strength.
“The economy is creating jobs at historically normal rates,” he said. “The problem is there’s no evidence to show that we’re going to make up for the losses (in jobs after the recession). We’re going to work this off slowly. Things are growing OK, but from a human standpoint, it’s not good, because a lot of people are out of work. But you have to tune out negative aspects of unemployment because it understates the health of the economy.”
He said the existing home inventory is back down to its normal range, while housing starts are going up.
“The housing market is smaller than it used to be, but quite healthy,” he said. “Lumber and some other construction-oriented things are doing fine.”
Going forward, the impact of the economy on the trucking industry depends on whether one believes the U.S. economy will strengthen or muddle along as it has been the past couple years.
Perry espoused the theory that when GDP growth falls below 2 percent, the trucking industry is adversely affected, and when it rises above 2 percent, it benefits to an even greater degree.
The threat of a driver shortage looms. Aside from the fact that federal regulations may restrict potential new drivers from the field, trucking companies have been reticent to add fleet capacity due to mediocre demand. - Eric Johnson