Low retail expectations hurt projections for trucking tonnage

The volatile economy has impacted many businesses in the U.S. Because the trucking industry serves so many other sectors, ranging from manufacturing to retail, it was hit particularly hard following the recession. However, recent statistics compiled by the American Trucking Associations demonstrated that the economy may be continuing  its recovery. The study showed seasonally adjusted truck tonnage increased 2.8 percent in December, adding to the strong gains realized in November, which reached nearly 4 percent. Firms that were able to improve profitability during the slight increases in trucking tonnage throughout December are considering investments in technology - such as routing and scheduling optimization, as well as fleet maintenance software -  to control costs and improve efficiencies in the long run. 

"December was better than anticipated in light of the very difficult year-over-year comparison," said Bob Costello, chief economist at the ATA. Despite the positive gains at the end of the year in 2012, Costello predicts that the trucking industry will slow down once again in 2013.

Retail sales expected to slow down in 2013
The impending fiscal cliff played a role in consumer spending during this year's holiday season, inhibiting many from spending as much as they have in years past. That negativity toward spending is expected to carry over into 2013, according to the National Retail Federation.

"As we saw during the holidays, this debate about the health of our economy and the conversations policy makers are having about fiscal policy is having a real impact on household budgets and consumer spending,"Matthew Shay, president and CEO of the NRF, said on a recent conference call, as quoted by Supply Chain Management Review.

The NRF projects retail industry sales will increase 3.4 percent in 2013, representing a decrease from last year's projection of 4.2 percent growth. Consumer behavior is changing, and many customers will be looking for ways to stretch their budgets. Unfortunately for retailers and shipping companies, this means many consumers will be scaling back spending. 

"And while it is not exactly known what the impact of the payroll tax hikes will be on retail spending, we can safely predict that consumers will be shopping for price more often, and there will be some trading down and reshuffling within various retail segments because of the changes people are seeing in their paychecks," continued Shay.

Retail sales impacting trucking tonnage
Demand for trucking carriers' services is directly affected by the needs of retailers and other clients. With decreased expectations for the upcoming year, trucking firms are preparing to handle less freight. Consumer spending is not expected to pick up throughout 2013. These projections will limit the inventory that retailers will send out to stores.

"As paychecks shrink for all households due to higher taxes, I'm expecting a weak first quarter for tonnage and the broader economy," Costello said. "Since trucks account for the vast majority of deliveries in the retail supply chain, any reduction in consumer spending will have ramifications on truck tonnage levels."

Ongoing pressures from lower income and higher taxes are expected to be hampering consumer spending throughout the year, demonstrating that the economic growth is not substantial enough to serve as an incentive for Americans to spend more money. This puts the onus on retailers to be more creative in their marketing and advertising campaigns to get people into their stores and buying their products.

"When you look at what has happened in both the freight economy and the overall economy over the last nine months, things have really flattened," said Eric Starks, president of freight transportation forecasting firm FTR Associates, in a recent interview with Logistics Management. "It is a somewhat stagnant environment, especially with retail sales."