Trucking takes turn for the worse

Analysts see industry – now ailing – as bellwether for entire U.S. economy

By Samantha Bomkamp
ASSOCIATED PRESS
2:00 a.m. May 18, 2009

NEW YORK – Looking for signs of economic recovery? Try counting the number of trucks on the road.

Trucks carry almost all the manufactured and retail goods in the country – from refrigerators to lumber, detergents to toys. Many economists gauge how fast assembly lines are running, and how much consumers are buying, by the volume of goods hauled by trucks.

The most recent earnings reports show trucks are not yet carrying enough to indicate recovery is near.

Slow consumer spending and stalled manufacturing activity took their toll on truckers in the first three months of the year. Nearly all major trucking companies reported lower first-quarter revenue and falling profits as the recession continued and shipping demand slid.

Many cut back their fleets because of soft demand. Werner Enterprises said it trimmed an additional 4 percent of its fleet of more than 8,000 trucks in the first quarter. Many companies said more cuts will come.

In the first quarter of 2009, about 480 trucking companies went under.
That's less than 1 percent of the nation's total freight capacity, which still leaves too many trucks competing for fewer shipments, said analyst Donald Broughton of investment bank Avondale Partners.

More than 3,000 trucking companies went out of business last year, taking seven of every 100 trucks off the road.

Broughton said more trucking companies inevitably will fail if the economy remains weak. The pace of closures needs to speed up, he said, to allow other trucking companies to get a bigger slice of shipments and to raise prices again.

Analysts believe the number of trucks on U.S. highways will continue to slide until supply is more aligned with demand. When the trucking business starts to pick up again, other economic factors – from the employment rate to the gross domestic product – eventually will follow, they say.

Tavio Headley, an economist with the American Trucking Associations, believes that trucking industry business will pick up as early as next quarter, and that the broader economy will show some minor improvements beginning in the last three months of the year.

That is slightly earlier than previous estimates by the ATA, but Headley emphasizes that the economy probably will stay weak for some time.

“We do expect the economy to continue to contract, but at a slower pace over the next few quarters,â€