Freight transportation and logistics economic outlook remains largely positive
There is a lot to like about the current strength of the freight transportation and logistics economy.
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In , the headline stated: “For the U.S. economy, this may be as good as it gets.” I sort of chuckled when I first saw it, mainly because of the matter of fact approach it seemed to take.
But after reading the article, which highlighted many of the positive things taking place within the economy, including low unemployment, strong GDP (will it hit 5% in the second quarter?), several months of ongoing economic expansion, and many other factors, it got me thinking, not about the current macroeconomic strength of the economy, but more so about the strength of the freight economy.
Based on the Moneywatch article, the working thesis was that we are at the peak of the good economic times, due to some looming obstacles that could potentially hinder the good times, or solid economic growth we remain in the midst of at the moment. These things include a recent tail off in consumer spending, a lower level of savings account increases, price hikes brought on by tariffs, and a fluctuating stock market, among others.
Even with these warning signs, though, when zeroing in on the current strength of the freight transportation and logistics economy, there are more than a few things to like, and also keep an eye on, too.
These things include the solid trucking market, which continues to benefit from the byproducts of strong pricing arena (for carriers), tight capacity, and solid demand. Other notable drivers include the somewhat nascent e-commerce-driven growth track of the last-mile logistics market, as well as manufacturing and industrial production strength, too.
To be sure, these things have a negative impact on myriad supply chain stakeholders, too, like shippers paying these high rates and brokers scrambling to find capacity. And we cannot forget motor carriers either. While margins are up, make no mistake that they are being very clear when they say they are having a very hard time finding truck drivers.
Things are not perfect, but one cannot, at the very least, be pleased with the current state of economic affairs, especially as it relates to the freight economy. There is a lot to like and be optimistic about, certainly in the short-term and perhaps in the long-term as well, but we will need to see how that plays out.
What’s more, the economic good times are clearly playing out, as they relate to the strong second quarter earnings results from various freight transportation and logistics heavyweights.
This has been seen in the form of things like higher operating income and revenues, and lower operating ratios. And they are also visible in quarterly operating metrics, too, including weight-per-shipments, pricing, and service levels, among others.
In previewing second quarter earnings, succinctly laid out the current state of affairs, as it relates to freight transportation and logistics’ strength.
“Over the past ~30 years, cyclical transports have historically outperformed the S&P 500 Index in the 3-month period following levels consistent with the most recent reading in the US ISM PMI,” wrote Hartford in a research note. “In addition, still-accelerating industry pricing growth remains a fundamental cyclical catalyst into 3Q18.”
What Hartford is saying here is that things remain on solid footing in freight transportation and logistics and likely will for the foreseeable future. What’s not to like about that?
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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