Could the LTL Industry Be Headed for a 2019 Recession?
Coming off a record-setting year, 2019 could see a significant downturn for the LTL industry. The final weeks of 2018 saw rising economic tension on Wall Street, followed by tariff-related uncertainty, and a truck driver shortage that simply won’t go away, many trucking industry experts suggest that a freight industry slow-down is a foregone conclusion. However, does this mean that a recession is possible?
In the information below, we’ll dive into some of the reasons why 2019 is expected to see reduced growth for the LTL industry, and a few ways shippers can take advantage of these issues to continually serve their customers and maintain their supply chain.
Why was 2018 Such a Strong Year for the LTL Industry?
There is no denying the fact that 2018 was arguably the strongest growth year the LTL industry has seen since the turn of the century. Rising demand for LTL services coupled by a shortage of qualified drivers lead to supply issues, which naturally increased the cost of LTL shipping. Since consumer sales across multiple verticals saw significant growth in 2018 as well, the need to keep the supply chain moving was a primary reason why the LTL industry saw charges increased by double digits in many instances.
Another area that impacted the entire transportation industry was a threatened 25 percent tariffs on $200 billion in Chinese imports. This caused a spike in the import of Chinese goods and others from overseas, which caused shippers and manufacturers to increase their inventory levels – and thus, a rise in LTL and FTL shipments. Economic growth in the US was higher in 2018 than any year in the past decade, while the rise in consumer spending also positively impacted LTL shipments.
What is Likely to Cause an Economic Downturn for the LTL Industry?
Many economic analysts have suggested that U.S. economic growth in 2019 is expected to be around 3 percent. However, with the current government shutdown and a divided Congress that isn’t expected to resolve issues efficiently, there are more questions than answers – and more reasons to suspect that the LTL industry will be impacted greater than others.
One of the largest customers of LTL services is the United States Department of Defense. While the military is not dramatically impacted by the current shutdown, one area that is impacted is civilian-operated segments of the DOD – such as logistics and supply chain operations. The global economy and market instability are another factor that will likely impact the efficient movement of freight. Historically speaking, when the stock market is volatile, consumer spending in the retail marketplace tends to be reduced as well. Since the LTL industry depends on strong consumer spending – fewer retail sales will result in fewer LTL routes.
What Factors Could Increase LTL Industry Revenue?
While there are several factors that could negatively impact the LTL industry, there are several that could have a positive influence. For instance, the US oil and gas exploration industry is continuing to rise, as is new home construction and rebuilding projects in several areas that experienced natural disasters in 2017 and 2018, such as the Southeastern US and California.
How Should Carriers Prepare for 2019?
The beginning of 2019 should pick-up where last year left off with booking LTL carrier services. Many in the LTL industry operate on a fiscal year basis, which typically is not dependent on the calendar year. This is why several LTL carriers negotiate their fuel surcharges and introduce their other charges in early fall. As such, shippers should be proactive about planning their LTL shipments headed into 2019. We’ll outline the best strategy for saving money on LTL shipments in an upcoming blog.
If your company is new to LTL shipping or you’re looking to streamline your logistics operations for the upcoming new year, working with a proven 3PL or third-party logistics company is a smart resolution. A professional 3PL can help a shipper of any size, from once per month to multiple shipments per day from different locations navigate the complex and ever-changing LTL industry.