We last heard from our favorite gloomy practitioner of the dismal art, the American Trucking Association’s chief economist, Bob Costello, back in September of ’09, when  he was—for an economist—rationally exuberant. “Most indicators,” Costello mumbled grudgingly, “indicate freight tonnage will exhibit moderate but inconsistent growth in the months ahead.”

Well, sometime early in Ought-Ten we seem to have turned the corner. After dodging back into his hole for six more weeks of winter, the groundhog has come up to sniff the spring and Costello has likewise emerged from a prolonged period of caution. “We’re climbing out of the hole.” he said in a recent interview, sounding—for Dismal Bob—positively chipper.

Been Down So Long It Looks Like Up

His remark was occasioned by ATA’s third straight monthly report of a rise in truck tonnage (February through April). Recently TransCore reported that its March index for the North American spot market freight jumped a phenomenal 259% from a year ago. While good news, this has to be taken in context; last year truck tonnage plunged 8.7%, the largest drop in 27 years.

To dim our budding hopes a little more, Costello cheerlessly noted that the increase is mostly limited to truckload carriers. The less-than-truckload market is still struggling with too many trucks and too little volume. While FedEx and UPS both have announced better than expected first quarter earnings, the parcel business is a category of its own; the forecast for LTT carriers in general is sluggish growth at least through summer.

Getting Ready to Bust

Otherwise, the freight outlook is positive and a long overdue up tick in pricing is on the way. “It’s getting ready to bust wide open.” said COO Tom Kretsinger Jr. of American Central Transport. This relief is due partly to increased demand but also to the results of decreased capacity. A lot of companies have sold rigs and a sad number have simply gone out of business.

 “We’re ending a four-year freight recession, thanks to a repaired credit market and a little help from the consumer.” said Art Hatfield, senior transportation analyst at Morgan Keegan. Agreed Todd Fowler, transportation analyst at KeyBanc Capital Markets, “What we’ve seen is a sustained improvement, not just a restocking.”

A Whole New Set of Problems

This welcome news brings its own set of problems however. When shippers start to demand more capacity, it may not be there. “We’re heading into the tightest supply the country has ever seen” comments Celadon’s CFO Paul Will. “Eventually we could be 300,000 units below what freight demand requires.”

John Wagner, CEO of logistics provider Wagner Industrials, thinks likewise. “Shippers think carriers can produce trucks to meet need. That’s not going to happen.” New trucks are more costly because of environmental requirements and while credit has improved, it’s still expensive. Moreover, the boomer generation of truck drivers is beginning to retire and for the first time in decades a driver shortage looms.

A Wee Frugal Recovery, Laddie

All in all, despite the rise in tonnage, there’s still a chill in the economic air, so drink your coffee before it gets cold. Public commerce economist Edward Leamer sums it up with a note of Scotch disapproval, “I call this a frugal recovery.” Adds Bob Costello, “We’re looking at a real bottleneck in capacity and demand.” Still, the crisis isn’t imminent. “I’m not giving any doomsday scenarios,” Costello concedes, sounding as if he wish he could. 

This story was drawn from articles in FleetOwner, Business Week, Kansas City Journal and CNN/Money.com. 

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