Key takeaways from ATA’s Freight Transportation Forecast

The American Trucking Associations (ATA) has released its latest U.S. Freight Transportation Forecast, which predicts freight volumes will grow 36% over the next 11 years. The most recent report, which is a partnership between ATA and IHS Markit, begins with a 2019 baseline and then projects through 2031 the amount of tonnage to be hauled, the revenue collected from those volumes by mode, as well as retail truck sales over that period, and the number of Class 8 vehicles in operation.

“Like the last several editions, we have included historical data for all modes of freight transportation back to 1990,” explained ATA Chief Economist Bob Costello in the report’s opening message. “The historical data is especially useful for gauging growth in each transportation mode, the magnitude of contraction during the recessions, as well as understanding modal share shifts over time.”

According to IHS Markit, total truck tonnage, including for-hire and private carrier operations, hit 11.84 billion tons in 2019, the highest level on record. As of last year, total truck tonnage was up 39% from the low in 2009.

“Even with the impact of the pandemic, total freight tonnage is projected to grow 21.7% over the forecast period, while total freight transportation revenue is forecasted to surge 45.7% by 2031,” Costello said. “This edition of the Forecast will identify the key contributors to this robust growth, focusing on manufacturing, consumer spending, and international trade, among many other factors.”

Key takeaways

As a result of the COVID-19 recession, after increasing 1.4% in 2019 the volume of freight transported in the U.S. is likely to collapse by 10.6% in 2020, ATA projects. Truck volumes are expected to fall 8.8% in 2020 after seeing a 3.2% increase in 2019. Growth in total truck freight volume is expected to recover with 4.9% growth in 2021, helping to establish a 3.2% compound average annual rate of growth from 2021 through 2026 followed by slowing average annual growth of 1.7% from 2027 through 2031, according to the report.

Bulk tonnage for trucks is expected to decline by 10.1% in 2020—also caused by the economic recession and the collapse in the demand for commodities. Growth in bulk tonnage is expected to average 2.9% per year during the 2021-2026 timeframe, and then 1.4% thereafter through 2031.

General freight truck traffic declines in 2020 will be less severe falling 7.3%, as overall consumer spending hasn’t fallen as much as manufacturing and shipments of commodities, according to the report. However, additional pressure is expected from major declines in building supplies and motor vehicle related markets. Growth in general freight tonnage is pegged at 2.8% per year on average from 2021 through 2031.

Trucks handled an estimated 72.5% of total tonnage in 2019, which could grow to 74% in 2020 and ease to 73.7% in 2021 as other modes including railroads and water lose market share to the flexibility of trucking in a troubled economy, ATA pointed out. Looking ahead, the overall demand/production of key truck-oriented commodities will change, resulting in truck market share declining to 71.9% by 2026 and to 71.4% in 2031, according to the report.

Truckload carriers

ATA estimates that 2019 truckload (TL) tonnage totaled 5.88 billion tons, and in 2019, TL carriers accounted for 36% of total domestic freight hauled. Truckload tonnage is forecasted to contract 9.2% during 2020 but grow on average 3.2% per year from 2021-2026 in recovery, reaching 6.41 billion tons in 2026, according to ATA.

In addition, truckload carrier revenue is projected to rise to $414 billion by 2026 and $486 billion by 2031, which translates into average annual increases of 5% from 2021 to 2026 and 3.3% in 2027 to 2031, according to the report. ATA projects that TL carrier revenue will account for 34.4% of total domestic transportation revenues by 2026 and remain near 34% through 2031.

“The depth of the recession has temporarily reduced the impact of the driver shortage, apart from the e-commerce last-mile delivery segment where demand has increased,” ATA explained. “Longer-term in recovery, there is no easy fix for the driver shortage, where the economy will return to conditions where a truck with a driver will be under increasing demand.”

Less-than-truckload 

ATA noted that it remains optimistic about less-than-truckload (LTL) carriers in recovery, as the LTL segment will benefit from the growth of e-commerce.

“LTL volume growth will reflect increases in consumer spending, business investment, foreign trade, and domestic manufacturing. LTL will benefit from online shopping expanding at almost twice the rate of total non-auto retailing,” according to the report. “UPS, FedEx, and their regional competition will be challenged by and yet grow from residential-driven e-commerce. LTL tonnage will not immediately have the support of recoveries in housing, construction, and light vehicle sales, instead in recovery LTL carrier tonnage will reflect the evolving product/commodity mix.”

ATA forecasts that LTL tonnage will reach 157.5 million tons in 2026 and 174.2 million tons by 2031, translating into an average annual growth of 3.7% per year in the 2021-2026 timeframe and 2% per year between 2027 and 2031.

“While LTL tonnage will still account for only 1% of total domestic freight by 2031, it will account for nearly 7% of total domestic freight revenues as we expect LTL revenue to rise to $78.9 billion by 2026 and $97.3 billion in 2031, which translates into average annual growth of 6.1% in 2021-2026, and 4.3% per year thereafter,” according to ATA.

Private fleet

Private fleet tonnage from 2022 through 2026 will be influenced by shifts in retail, especially food-at-home and e-commerce growth as well as the pace of recovery in manufacturing, the report stated. Beyond 2026, growth in private fleet movements of non-durable goods categories will slow as U.S. manufacturing output of those goods averages 1.4% growth annually from 2027-2031 compared with 3.5% average annual growth from 2022-2026.

“Beyond the impact of economic recovery and freight demand growth, private fleet freight flows will reflect the decisions of corporate managers to either keep transport operations in-house or outsource them,” according to ATA. “Private fleets are a large, fixed expense and the recession has squeezed many firms’ supply chain and associated logistics operating costs, in a cost cutting, reduced-sales environment.”

Commercial vehicle demand

Looking ahead, ATA expects truck sales to drop from 778,373 units sold in 2019 to just 523,714 in 2020 before recovering to 612,878 units sold in 2021. Thereafter, ATA projects sales to grow through 2026 (averaging roughly 703,646 units per year from 2022 through 2026). ATA also expects to see increases in truck sales to average 706,595 units per year from 2027 through 2031.

Sales of small commercial trucks, medium-duty trucks, and heavy trucks do not move in lock step, the report pointed out. The greatest growth rates in 2019 were with Class 6 trucks at just over 11%, while Class 8 saw strong 8.7% growth, Class 4 sales were down 3%, and Class 7 sales were flat.

“While the broad economic environment is terrible in the midst of this recession, there are sector-specific influences on the demand for trucks, different classes of trucks have different applications and replacement cycles,” ATA stated. “In 2018, Class 8 trucks experienced an unusually strong sales year, selling 30% more trucks than in 2017 almost eclipsing the sales of light-duty Class 3 trucks that year. Unfortunately, Class 8 sales are forecast now in the recession to see the greatest category sales decline of 48% for 2020.”

Conclusions

Freight transportation has been significantly hit by the depth of the 2020 recession. According to ATA, “U.S. GDP growth is projected at a historic -6.1% for 2020, yet recovery is expected to begin during the second half of 2020.”

“The domestic economy remains the driving force behind the performance of the nation’s freight industry, with foreign trade playing a secondary, but significant, role during the recovery,” according to the report. “Based on our expectation of the U.S. and global economies, the nation’s freight pool could grow by 22% over the 12 years from 2020-2031.”

ATA also pointed out that there are, however, “great downside risks” to its forecast. Those risks include the potential for a second wave of COVID-19 infections until a vaccine is widely available, new setbacks with tariffs or additional international territorial disputes, major national disasters, or other shocks.

“Specifically, while we remain hopeful that health impacts on the economy and future trade wars can be avoided, any precipitous and deleterious changes in the economy or trade could result in significant negative changes to these freight flow forecasts in general and to trucking in particular,” the report stated.

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