State of American Trucking

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1 State of American Trucking October 11, 2018 Rod Suarez Economic Analyst American Trucking Associations

2 Business Cycles U.S. Expansions Duration October July 1953 May August 1957 April April 1960 February December 1969 November November 1973 March January 1980 July July 1981 December July 1990 March March 2001 November December 2007 June Current 111+ Average Months Sources: National Bureau of Economic Research and ATA

3 Average GDP Growth (%) U.S. Expansions by Strength & Duration (1949 to Current) Current US Expansion Months

4 Real Gross Domestic Product Growth 4% 3% 2.7% 2.9% 2.8% 2% 2.2% 2.3% 2.0% 1.5% 1% 0% Avg Avg Sources: BEA & ATA

5 The Drivers of Truck Freight, Plus Inventories 7.0 Unemployment Rate (Percent) 1.4 Total Housing Starts (Millions) 106 Factory Output (Index) 1.45 Inventory to Sales Ratio Sources: BLS, Census, and Federal Reserve

6 Job Market Monthly Job Changes (Thousands) Unemployment Rate (Percent) Previous 12-month avg: 201, % 4.4% 3.9% 3.5% Sep: lowest level since Dec 1969 Sources: BLS & ATA

7 Thousands U.S. Economy is at Full-Employment 16,000 Unemployed and Job Openings 14,000 12,000 10,000 Unemployed Job Openings 8,000 6,000 4,000 2,000 0 Sources: Department of Labor

8 4% Employment Costs: Wages & Salaries 3% 3.2% 2.3% 2.4% 2.6% 3.1% 3.4% 3.5% 2% 1.8% 1% 0% Avg Avg Sources: BLS & ATA

9 Single-Family Housing Starts Will Continue Their Upward Climb Total Housing Starts (Monthly; Annualized Rate; Millions) Single-Family vs Multi-Family Units (Monthly; Annualized Rate; Millions) Single-Family Multi-Family Sources: Census & ATA H.S M 1.21 M 1.28 M 1.37 M 1.45 M

10 Factory Output is Stronger, But Outlook Recently Downgraded Factory Output (Index) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Factory Output (Year-over-Year Percent) Sources: Federal Reserve & ATA Output -0.7% 1.5% 2.6% 2.6% 2.0%

11 Total Business Inventory-to-Sales Ratio (Data adjusted for seasonal, holiday, and trading-day differences, but not price changes) Likely Optimal Range Source: Census Bureau

12 Freight Market

13 Total For-Hire TL Loads Index: January 2010=100; 3-Month Moving Average Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck

14 8% 7% 6% 5% For-Hire Truckload Loads Growth Total TL Dry Van 6.4% 6.0% 5.4% 7.2% 4% 3% 2% 3.0% 2.1% 1% 0% 0.1% 0.8% Q YOY Jan-Jul 2018 YOY Source: ATA s Trucking Activity Report

15 For-Hire Truckload Loads Year-Over-Year Growth Q Jan-Jul 2018 Dry Van 0.8% 2.1% 5.7% 7.2% Temp Controlled -0.3% 5.0% -0.1% -8.8% Flatbed 5.2% 1.3% -8.7% -6.1% Tank Truck 0.0% -2.8% -3.2% -3.9% Short-Haul (<500 miles) 1.5% 2.4% 2.8% 3.4% Long-Haul (>1,000 miles) 1.7% 7.8% 6.1% 4.1% Source: ATA s Trucking Activity Report

2014 2015 2016 2017 2018 Source: ATA s Trucking Activity

16 Total For-Hire TL Miles Index: 2010=100; Seasonally Adjusted; 3-Month Moving Average Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck

17 Source: ATA s Trucking Activity Report Dry Van Truckload Average Length-Of-Haul Continues to Fall

18 For-Hire Truckload Revenue Revenue (Index; 2015=100) 20% 15% 10% 5% 0% -5% Revenue (Year-over-Year Percent) 80-10% Excludes FSC Revenue Source: ATA s Trucking Activity Report

19 For-Hire Truckload Revenue Year-Over-Year Growth Q Jan-Jul 2018 Dry Van -4.4% 0.7% 15.1% 20.5% Temp Controlled -5.2% 4.8% 13.8% 14.6% Flatbed -0.2% 2.0% 9.1% 11.5% Tank Truck -0.6% 0.7% 3.3% 5.6% Short-Haul (<500 miles) -0.5% 3.5% 18.1% 23.4% Long-Haul (>1,000 miles) -18.2% 15.8% 8.8% 15.2% Excludes FSC Revenue Source: ATA s Trucking Activity Report

LTL Tonnage Index: 2010=100; 3-Month Moving Average 150 145 140 135

20 LTL Tonnage Index: 2010=100; 3-Month Moving Average Source: ATA s Trucking Activity Report

21 5% LTL Tonnage Growth 4% 3.8% 3.9% 3% 2% 1.7% 1% 1.0% 0% Q YOY Jan-Jul 2018 YOY Source: ATA s Trucking Activity Report

22 U.S. Bank Quarterly Trucking Freight Payment Indexes Shipments (Index; 2015=100) Spend (Index; 2015=100) Source: U.S. Bank

23 Industry Capacity Remains Very Constrained

24 US Retail Class 8 Truck Sales Thousands Includes Tractors & Straight Trucks Source: ATA s American Trucking Trends 2018 & ACT Research

25 US Active Population Class 8 Truck Age Years year average Includes Tractors & Straight Trucks Source: ACT Research

26 US Class 8 Tractor Exports Units 25,000 20,000 15, year average 10,000 5, * * 2018 is a YTD annualized rate Source: Census Bureau

27 Top Importers of U.S. Used Tractors % 28% 26% 25% 5% 10% 13% 25% 6% 10% 14% 19% Russia Mexico Nigeria Canada Panama Others Mexico Vietnam Guatemala Nigeria Canada Others

28 7.0% 5.0% 3.0% 1.0% For-Hire TL Tractor Changes: Large vs Small Fleets Includes company tractors and independent contractor equipment YTD 5.1% -1.0% -3.0% -1.5% -0.2% -0.6% -5.0% -7.0% -5.0% -5.0% Large TLs Small Fleet: Less than $30 million in annual revenue Small TLs Source: ATA s Trucking Activity Report 2018 data is through July

29 For-Hire Truckload Tractor Data 15% 10% Company & I.C. Power Units (Year-over-Year Percent) Large TL Small TL 5% 0% -5% -10% Source: ATA s Trucking Activity Report

30 Large TLs: Company Tractors vs Independent Contractor Equipment Index: January 2017= Company I.C. Trough to Peak: +3.6% 100 Peak to Trough: -3.9% Source: ATA s Trucking Activity Report

31 Small TLs: Company Tractors vs Independent Contractor Equipment Index: January 2017= Company I.C. 100 Trough to Peak: +3.2% Peak to Trough: -2.5% Source: ATA s Trucking Activity Report

32 LTL Truck Counts (Index: 2015 = 100) YTD +0.1% over same period in Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: ATA s Trucking Activity Report

33 For-Hire TL & LTL Pricing Proxies Year-Over-Year Growth Q Jan-Jul 2018 Dry Van -3.4% 0.1% 16.0% 18.5% Temp Controlled 1.6% 3.4% 9.5% 13.1% Flatbed -3.0% 2.3% 10.9% 11.7% Tank Truck -1.7% 4.5% 12.8% 16.5% Short-Haul (<500 miles) -0.6% 2.0% 16.6% 18.2% Long-Haul (>1,000 miles) -15.4% 3.7% 12.3% 13.6% LTL 1.4% 0.0% 5.2% 6.5% Source: ATA s Trucking Activity Report Truckload: Average Revenue per Mile LTL: Average Revenue per Ton Excludes FSC Revenue

34 For-Hire Truckload Revenue per Mile 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Year-Over-Year Growth Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck Excludes Fuel Surcharges

35 The Driver Situation Remains Very Difficult

36 Truck Driver Turnover Rates 100% 75% 98% 82% 96% 95% 79% 90% 93% Large TL Small TL LTL 87% 79% 81% 78% 79% 96% 98% 73% 72% 50% 25% 9% 11% 11% 11% 9% 9% 12% 14% 0% H 2018 Q Source: ATA All rates are annualized

37 The driver shortage is primarily an over-the-road for-hire truckload issue. So how many drivers are in that space? 10 Million CDL Holders 3.5 Million Truck Drivers 1.7 Million Heavy & Tractor-Trailer Drivers 870,000 For-Hire Trucking Heavy & Tractor-Trailer Drivers Based on government data, ATA estimates that there are roughly 500,000 OTR for-hire TL drivers. Source: U.S. Department of Labor

38 Driver Shortage 51,000 Source: ATA s Truck Driver Shortage Analysis 2017

39 Thousands of Jobs Jobs Created by Industry Since January Manufacturing Construction For Hire Trucking 30 Source: Department of Labor

40 Source: ATA s 2017 Driver Compensation Study ATA Driver Compensation Study

41 WHAT ELSE CAN BE DONE? DRIVE-Safe Act Improve driver efficiency/driving time Reduce driver waiting times 8,500/month to 9,000 = 5.9% 8,500/month to 9,500 = 11.8% Female Drivers

42 Download ATA s Report for Free at:

43 The Long-Run Looks Good Too

134% Air, 37% Rail Intermodal, 35% Trucking, 27% Waterborne, 16%

44 Growth in Tonnage 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Total Increase from 2018 to Pipeline, 134% Air, 37% Rail Intermodal, 35% Trucking, 27% Waterborne, 16% Rail Carload, 5% Source: U.S. Freight Transportation Forecast to 2029

45 2029

46 Thanks!

THANK YOU TO OUR SPONSORS

THANK YOU TO OUR SPONSORS General Session 2 Data Driving Your Recruiting & Retention Decisions Bob Costello, Chief Economist & Senior VP, American Trucking Association Bob Costello ATA Chief Economist