Bob Costello Chief Economist & Vice President American Trucking Associations Economic & Motor Carrier Industry Trends September 10, 2013
The Freight Economy Washington continues to be a headwind on economic growth 2013 tax increases, sequester, budget debate, and healthcare (2014). The housing recovery and auto production are helping freight volumes. The U.S. energy production boom is boosting truck tonnage. Freight drags include, slower manufacturing output and concerns over Fed tapering.
30% 25% 20% 15% 25.0% Various Housing Industry Measures (YTD Year-Over-Year Percent Change) 23.1% 22.0% 19.3% 17.2% 10% 5% 0% New Housing Starts New Home Sales New Permits Residential Construction Spending Existing Home Sales Sources: Census Bureau, NAR, and ATA
Myth 1: Recent increases in home prices and interest rates will derail the housing recovery.
Home Prices Percent Change in Single-Family Home Prices From July 2012 +15.0% +16.4% +23.2% +27.0% +17.0% +6.5% TN home prices are off just 4.3% from peak in July 2007. Source: CoreLogic >15% <0% 10%-14.9% 5%-9.9% 0%-4.9% National Average: 12.4%
30-Year Fixed Mortgage The Housing Recovery 6% July: 4.37%, the highest average since July 2011. 5% 4% 3% 2% 2009 2010 2011 2012 2013 Sources: Freddie Mac & ATA Low: 3.4%
20% 15% 30-Year Fixed Mortgage Rates (1972-2013 YTD; Average Annual Rates) 1981: 16.6% 2013 YTD: 3.7% 10% 5% 0% 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Source: Freddie Mac
Despite the Rise in Mortgage Rates, 30- Year Fixed Mortgages & Home Ownership is Still Cheap Historically Year Median Home Price Inflation Adjusted Median Price Interest Rate Monthly Payment Inflation Adjusted Monthly Payment 1981 $68,900 $182,812 16.60% $960 $2,547 2003 $195,000 $255,744 5.83% $1,148 $1,506 2013 $257,200 +41% 81 +1% 03 4.37% $1,317 Monthly payment is interest and principal only; Median home prices are of new residential homes (2013 is July); Inflation adjusted is Q2 2013 Dollars Sources: Freddie Mac, Census Bureau, Bureau of Labor Statistics, and ATA -48% 81-13% 03
Housing Summary Rising prices and rising mortgage rates will slow the housing recovery, but not detail it. 5.1-months supply of existing homes in July, down from 6.3-months in June 2012, which is helping home building. Distressed homes foreclosures and short sales were only 15% of sales in July, down from 24% a year earlier. Home prices increased 12.4% from July 2012, the 17 th straight gain, although prices are still 18% below April 2006 peak.
Myth 2: Consumer confidence drives consumer spending.
Drivers of Household Spending 10% 2012 2013 2014 9.5% 5% 3.7% 5.2% 4.8% 1.7% 1.6% 1.6% 2.0% 0% Total Payrolls 0.3% Real Disposable Income Existing Home Values Sources: BEA, BLS, and ATA
Thousands 300 275 250 225 200 175 150 125 100 75 25 50-25 0-50 -75 Sources: DOL and ATA Average Payroll Changes by Quarter 2012 2013 2014 Jobs (Avg/mo) 186k 182k 210k Unemployment Rate 8.1% 7.6% 7.2% 2010 Q2 2013 Avg 155k 2010 2011 2012 2013
Billions Retail Sales 2012 2013 2014 $450 Total Sales 5.3% 4.2% 5.4% 15% $425 $400 Year-over-Year Percent Change (Speed) Level (Direction) 10% 5% $375 $350 $325 $300 2005 2006 2007 2008 2009 2010 2011 2012 2013 0% -5% -10% -15% Sources: Census Bureau & ATA
Myth 3: The U.S. doesn t make anything anymore.
World s Top Manufacturing Economies Fact: U.S. is largest or second largest manufacturing country depending on how it is measured. China 17.9% China 15.2% ROW 59.6% U.S. 14.9% ROW 56.7% U.S. 19.3% Japan 7.6% Japan 8.8% Current $ Real $ with Exchange Rate Adjustments Source: United Nations
New Factory Orders x Aircraft $480,000 $460,000 $440,000 $420,000 $400,000 $380,000 $360,000 $340,000 $320,000 $300,000 Year-over-Year Percent Change (Speed) Millions of $ (Level) 2009 2010 2011 2012 2013 30% 20% 10% 0% -10% -20% -30% -40% Sources: Census Bureau & ATA
2007 = 100 Factory Output 100 95 Year-over-Year Percent Change Level of Production 10% 5% 90 85 80 2012 2013 2014 Factory Output 4.2% 2.3% 2.9% 0% -5% -10% -15% 75 2009 2010 2011 2012 2013-20% Sources: Federal Reserve & ATA
5% 4% 3.6% Increases in U.S. Factory Output by Decade (Average Annual Increases) 3.5% 3.7% 3% 2% 1% 2.0% 1.5% 0% Sources: Federal Reserve and ATA 1970s 1980s 1990s 2000s 2010s
Myth 4: The U.S. imports most of our energy.
Million Barrels per Day U.S. is Becoming Energy 12 11 10 9 8 7 6 5 4 3 2 1 0 1. Total U.S. fuel consumption is at the lowest level in 17 years. 2. The U.S. is now a net fuel EXPORTER for the first time since 1949. 3. By 2020, the U.S. is projected to become the largest oil producer globally (currently number 3). Crude Oil Imports Crude Oil Production 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: EIA
20% 15% Crude and Natural Gas Production (Annual Increases) 13.8% 15.1% 2012 2013 10% 5% 5.4% 0% Crude Source: Energy Information Administration 1.0% Natural Gas
Myth 5: Inflation is on the verge of surging.
Inflation Measures (Average Annual Percent Change) 4% 1980-2012 3.3% 3.3% 2013 YTD 3% 2014 Forecast 2.5% 2.3% 2% 1.6% 1.4% 1.7% 2.0% 1.6% 1.6% 1% 1.1% 0.3% 0% Sources: DOL and ATA CPI Core CPI PPI Core PPI CPI: Consumer Price Index Core CPI: CPI x Food & Energy Prices PPI: Producer Price Index Core PPI: PPI x Food & Energy Prices
Core CPI Wage Growth Drives Inflation (Scatter Plot of Private Industry Wage Growth & Core CPI) 14% 12% 10% 1960-2012 8% Sources: DOL & BEA 6% 4% 2% 0% -2%-10% -5% 0% 5% 10% 15% Private Industry Wages
Myth 6: Fed tapering and rising interest rates will end the recovery.
Higher interest rates can have some positive impacts More risk taking/lending by banks More investment from foreigners
6% 5% 4% Real Gross Domestic Product (quarterly, annualized rate percent change, 2005 dollars) 2010 Q4 2014 2012 2013 2014 Real GDP 2.8% 1.5% 2.7% 3% 2% 1% 0% 2010 2011 2012 2013 2014 Sources: BEA and ATA
Trucking Trends: Demand
Changes in Freight Volumes (Seasonally Adjusted) 5% 4.7% 4% 3% 2% 1% 2.3% 0.8% 2012 Jan-Jul YOY 2.4% 1.3% 0% -1% -0.1% Tonnage TL Loads LTL Shipments Sources: ATA s Monthly Truck Tonnage Report & Trucking Activity Report
9% Changes in TL Loads by Sector (Seasonally Adjusted) 7% 5% Jan-Jul YOY 5.1% 3% 1% 1.7% 2.5% 0.8% -1% -3% -0.6% Source: ATA s Trucking Activity Report Dry Van Flatbed Temp Tank Spot Loads Only
10% 5% 2.1% Changes in TL Loads by Sector (Seasonally Adjusted) Jan-Jul YOY 6.7% 0% -5% -10% -15% -20% -0.6% Short: < 500 miles Medium: 500-999 miles Long: >1,000 miles -15.8% Source: ATA s Trucking Activity Report Short Medium Long Intermodal
Trucking Trends: Capacity
0% TL & LTL Capacity Changes (Percent Change in the Number of Company & IC Tractors) 0.6% -5% -4.9% -1.6% -10% Jan-Jul YOY -15% -20% Jun '13 vs Dec '07 Includes all types of truckload carriers -15.0% TL Source: ATA s Trucking Activity Report LTL
Are All TL Fleets Adding Capacity? No Decreased Tractors 37% Added Tractors 39% Unchanged 24% Average Month in 2013 Source: ATA
TL Supply vs Demand 110 105 2005 = 100 100 95 TL Tractor Count Index TL Loads Index 90 85 80 Oversupply Through July 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ATA
103 102 101 Large For-Hire TL Carriers: Trends in Independent Contractors & Company Drivers Includes all types of TL carriers; January 2012=100; Carriers with at least $30 million in annual revenues Company Drivers: +0.6% 100 99 ICs: -0.2% 98 2012 2013 Source: ATA s Trucking Activity Report
110 108 106 104 102 100 98 96 94 92 90 Small For-Hire TL Carriers: Trends in Independent Contractors & Company Drivers Source: ATA s Trucking Activity Report Includes all types of TL carriers; January 2012=100; Carriers with less than $30 million in annual revenues 2012 2013 Company Drivers: +8.6% ICs: -7.2%
ELDs HOS THE CUMULATIVE EFFECT Adding It All Up Reduction in Productivity Fewer Qualified Drivers Sleep Apnea ELDs CSA Increased Demand & Less Supply Economic Growth Truck Count Down from Peak in 2007 Capacity Crunch
The Driver Situation
TL Truck Driver Turnover Rates 150% 125% 100% Large Small Q1 2013 Large TL: 97% Small TL: 82% LTL: 15% 75% 50% 25% 0% 2005 2006 2007 2008 2009 2010 2011 2012 Q1 '13 Source: ATA
35% 30% 25% 20% 15% 10% 5% 0% 28.0% Construction Industry 25.7% Snapshot From June 2012 through March 2013, construction employment increased by 184,000. And, in February 2013 alone, construction payrolls grew by 48,000, the largest single month in 7 years. 2012 2013 YTD 2.0% 2.7% Housing Starts Sources: Census Bureau and Department of Labor Construction Employment
Industry Costs
Costs Continue to Rise Regulatory Costs Equipment HOS Drivers Pay Turnover Recruitment Fuel Despite Record Production, Fuel Costs Remain Elevated
Average Weekly Earnings for TL $900 $800 +2.8% in Q1 13 YOY Drivers +58% since 1990 $700 $600 $500 $400 $300 $200 $100 $0 1990 1995 2000 2005 2010 2012 2013 Q1 Source: Department of Labor
$900 $800 $700 $600 $500 $400 $300 $200 $100 $0 +1.1% in Q1 13 YOY Real Average Weekly Earnings for TL Drivers 2012 Dollars -11% since 1990 Source: Department of Labor 1990 1995 2000 2005 2010 2012 2013 Q1
Miles Per Truck Per Month Are Down 15,000 Includes all types of TL carriers 10,000 10,946 8,926 7,604 8,250 8,080 7,752 8,069-26% 5,000 0 2007 2008 2009 2010 2011 2012 2013YTD Source: ATA
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