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An Economic and Regulatory Update for Trucking Industry

We’ve been spending a lot of time talking about the truck, trailer and its equipment, but have only discussed the economic and regulatory environment once or twice in the recent past. Perhaps it’s time to readjust our spotlight.

There’s been a lot of news out that the economy is improving and trucking is on track for record numbers. But is this really the case? Digging a little deeper may reveal a far more complicated picture.

How Rosy Is It?

According to a recent report from forecasting firm FTR, “the recovery is getting a little stale.” Using a simple chart, FTR economist Noel Perry was able to show how this recovery is the weakest since World War II.

Even so, trucking has continued to reap the rewards of prosperity, the best since the end of the Great Recession. Some fleets are seeing their best years ever. Still, the report does not suggest growth in the range of 3 to 3.5 percent will happen. It’s more likely we’ll see growth next year to hover around 2.5%.

If you look at past trends, it’s unusual for a recovery to be stronger in the end than it was in the beginning. Does this mean we shouldn’t believe the economic forecasts that project continued expansion and recovery?

Is There A Risk?

Perry went on to state that he believes there is a risk of another recession. He pointed to the “perilous economic situation in many parts of the world.”

Even though the current economic headwinds seem to be blowing in the right direction, the freight economy doesn’t tend to behave well late into a recovery.

According to FTR’s numbers, we may be seeing a slowdown somewhere in mid-2017 to mid-2018, when freight growth is likely to come in around 1 percent annually, compared to 4.8 percent annually so far during this recession and recovery.

While this is just the opinion of one man working for a trucking research firm, do his predictions hold weight? Furthermore, how could other factors play in to further muddle the picture?

Regulations and Shortages

As the driver shortage drags on, it may not matter where trucking’s growth numbers come in. Even if FTR were reporting a better outlook, trucking needs tens of thousands of new truck drivers this year alone. The inflow of applicants simply isn’t enough to keep the wheels greased.

Another potential complication arises in the form of regulations. As we speak, the FMCSA is in the process of writing regulations that should go into effect somewhere in between 2016 and 2018. These regulations will have a profound effect on the trucking economy.

The main reason these changes are expected to have a big impact is because there will be so many of them at once. New rules will cover everything from e-logs to training mandates and speed limiters. And the list goes on.

What’s The Impact?

It could be that once the bulk of the new regulations hits, hundreds of thousands of potential truck drivers could be disqualified. As has been shown in the hours of service debate, regulations have unintended consequences, one of which includes decreased productivity.

Decreases in productivity mean more truck drivers will be required to haul the same amount of freight. Another graph in the FTR report showed that when the 34-hour restart rule went into effect in mid-2013, productivity dropped. At the end of 2015, when the rule was relaxed, productivity jumped.

It isn’t hard to look at this data and determine how rules governing speed limiters and e-logging could once again have a negative impact on truck driver productivity. Even so, let’s not get too down on ourselves.

The fact remains: Trucking is thriving and right now is a great time to be in the industry. Just always remember to keep your eyes on the horizon. Should the trucking economy face adversity, preparation will be key.

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