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5 reasons trucking will be good in 2015

Analysts at GE Capital have compiled a list of trucking-industry trends for 2015, focusing on freight, equipment, rates and capacity. There’s much to be happy about:

  1. Pricing leverage: Freight rates are expected to be moderate this year as all the new trucks that were ordered in 2014 relieve some of the strain in capacity. However, the difficulty of new market entrants due to stiff regulations, driver shortages, and liability and insurance costs will prevent the industry from increasing capacity enough to completely meet the demand. In addition to that, upward pressure on driver wages and benefits will help to justify higher freight rates despite the decrease in fuel surcharges;
  2. Low fuel prices: Declining diesel prices are expected to continue into 2015, according to analysts, but energy production might be a negative for freight due to a sharp decline in crude oil prices. That said, GE Capital feels the benefits to trucking from lower diesel prices significantly outweigh any drag on tonnage for all but those carriers with a highly concentrated exposure to energy transport;
  3. U.S. GDP growth: GE’s economists say the U.S. economy will continue to gradually improve and U.S. gross domestic product [GDP] growth will rise from 2.2 percent in 2014 to 2.8 percent in 2015;
  4. Strengthening freight volumes: A modest hike in GDP growth will boost construction activity, light vehicle sales and retail sales, which will continue to drive freight tonnage;
  5. Healthy truck sales: GE’s outlook for equipment production and sales is that growth will slow relative to 2014 in the medium and heavy-duty truck markets, but should remain positive during 2015. Much of this is due to the huge boost that came towards the end of 2014 continuing into the beginning of this year, with analysts saying that it is unrealistic to expect that pace to continue through 2015.

Analysts warn that 2015 won’t be without its challenges, namely that driver turnover is at a historically high level in the long-haul market, operating inefficiencies due to regulatory mandates, driver shortages and pressure to improve driver compensation and benefits.

Interest rates will also go up, but analysts don’t believe it will pose a significant threat to the primary drivers of freight tonnage as long as the increases come gradually and are reflective of a steadily growing U.S. economy. However, a significant spike in interest rate volatility could present a challenge to positive tonnage market.

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