REPORT: ‘Supply-Demand Imbalance’ to Weaken Truckers’ Profits Deep Into 2020
Columbus, IN – A major drag weighing on the bottom lines of trucking businesses in 2019 was a disparity in the supply-demand balance, and that’s not likely to change until much later in 2020, according to trucking market analyst ACT Research.
According to its latest State of the Industry: NA Classes 5-8 Report, ACT projects that the U.S. economy is poised to expand modestly by 1.8% in 2020, but the trucking industry will continue to be roiled by a “supply-demand imbalance.”
“The risk of an economy-wide recession that was a growing concern through Q3’19 has largely faded, with healthy consumer fundamentals expected to provide sufficient momentum to get through the slow patch in industrial activity,” said Kenny Vieth, ACT Research’s President and Senior Analyst.
However, Vieth expressed continued concern about the oversupply of tractors relative to freight demand.
“The manufacturing recession continues, and the supply-demand imbalance between trucks and freight currently weighing on carrier profitability is likely to extend deep into 2020,” he predicts.
While Vieth expects this market dynamic to continue well into 2020, others expect to find greater balance as soon as Q2’20.
In the final months of 2019, mega carriers such as Knight-Swift and U.S. Xpress pointed to the “overcapacity problem” to help explain why earnings were much weaker than expected.
David Jackson, C.E.O of mega carrier Knight-Swift, recently told CNBC the trucking industry is currently experiencing an “oversupply problem” that is going to continue to bring “near term pressure on freight rates.”
However, Jackson expressed optimism that recent employment reductions within the driver pool could soon help improve the operating environment for carriers.
He said that since “capacity is leaving the space” due to a string of carrier failures that defined much of 2019, he expected freight rates to begin improving by the time the second quarter of 2020 rolls around.
“People in the industry and investors are looking for when that inflection point will come. General consensus is, that is happening the second quarter of 2020,” Jackson predicted.
The supply-demand imbalance, along with a freight recession, made Transportation Nation Network’s (TNN) top 10 stories of 2019, so you can be certain we will be monitoring it throughout 2020.