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FTR Economist: Four Disruptions Facing US Freight Industry

During a session titled, The Future of Trucking: Quantifying an Unknown Future, FTR Truck & Transportation Expert Noël Perry outlined four “exogenous” or outside “exposures” facing the U.S. freight economy.

“In some cases, great opportunities, and in some cases really nasty things that people don’t want to talk about,” Perry said. “These could all throw a monkey wrench in the works. Some are positive, some are negative—but they’re all real. The only issue is we can’t quite figure out the timing. You need to be ready.”

As reported by Fleet Owner magazine, Perry mapped out his forecast for the U.S.:


The recovery from the 2007-2009 Great Recession is “getting stale,” Perry explains. He charted the recovery periods following eight previous downturns, the current recovery has already outlasted four of those. The longest, following the 1991 recession, lasted eight years. That means that, even if the ongoing recovery makes it that long, the U.S. is due for another economic struggle by 2019.

“Regardless of what’s going on the world, it would be historically unprecedented for us not to have a recession in the next three years,” Perry said, explaining that truck freight typically crashes in a recession.

“You need to have that in your three-year plan,” he said. “If you’re putting in capital now, you have to understand that somewhere out there, in the three or four years, there’s going to be a year or two when you’re not going to get any returns on that capital.”

.. and that’s not the worst of what can happen:


Global sovereign debt continues to grow. The financial crisis in Greece (and to a lesser extent Japan) is just an early sign of problems to be faced by borrower countries around the world, including North America.

“At some point, that bill is going to come due—and we don’t want to face it,” Perry said. “And that’s only going to make it worse. The result is something called a ‘depression.’

“At some point we’re going to have put up with the same problem because we have this borrowing jag that we can’t get off of,” he said. “It’s unlikely we will vote to solve the problem beforehand, because it means pain.”

Perry figures a depression could be expected in the 2020s. He also noted that depressions do end and are typically followed by dramatic economic recoveries.

“The recovery becomes strong because, when you have a depression, you clean out the crap that caused the problem in the first place,” Perry said.

Regulatory drag

The impact of the DOT’s regulatory agenda on capacity utilization will be unprecedented by 2019, Perry explained.

Essentially, at the peak, the industry will not be able to find the additional drivers it needs to keep up with additional capacity required to overcome the inefficiencies brought on by new regulations.

The caveat is the demand side of the equation. A recession would likely mean that utilization will remain below the level of a capacity crunch. But any improvement in the economy would elevate that crunch to “the mother of all capacity crises” at well above 100% utilization.

Productivity revolution

Looking beyond the capacity crisis and toward 2030, however, Perry points to the digital tools now being developed to more efficiently manage the supply chain and the range of trucking’s operational costs: risk, fuel, drivers, and productivity. All in, these could add up to savings of more than $1 per mile—of half of the current costs.

He pointed to the way ride sharing technology has turned the taxi market upside down—and no one saw it coming. But he had an even bolder prediction.

“I’ll be very direct: In 15 years trucks will be automated,” Perry said. “Automation will lead a revolution as important to the economy—and to the industry—as the invention of the super-highway in the early 1950s,” Perry said. “If you think this is ‘pie in the sky’ stuff, just look in the newspaper and all of the talk about automating cars. It’s already in the marketplace. Remarkable.”

Full Fleet Owner article here.

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