Despite transport stocks recently hitting highs and intermodal shipping attracting more business due to the tight trucking market, experts believe that the recent feverish growth in trucking is now in the rearview mirror.

“Peak trucking has passed,” stated a recent  FreightWaves report. And at a recent Stifel trucking conference, Larry Gross, a principal at Gross Transportation Consulting, went on record saying that North America is past the worst of the trucking shortage and that rates in the industry will start to moderate:

“Going forward the industry is in the process of correcting and adding the people and adding drivers. The industry is going to get their driver cohort right sized, which is not to say that it’s going to be easy to recruit drivers, but it won’t continue to be as difficult and and wages will continue to have to go up but not to the extent that we’ve seen recently.”

At the same time, truck transportation employment was up for the fifth straight month, as it added 4900 jobs to payrolls in September, accelerating from one year ago today. Rates for trucking peaked at 20% year-over-year growth early this year, but as new drivers join the workforce, and with difficult comparables, these numbers are expected to slow next year.

Gross continued:

“In terms of rates, contract rates have been rising quite rapidly this year, but we do expect that rate of increase to drop back down. Not necessarily down to zero, but certainly the rate of increase will up will slow down as we go forward here through 2019 and into 2020.”

With trucking rates through the roof, intermodal volumes were at their best levels in four years, according to statistics provided by the Intermodal Association of North America. Year to date revenue for intermodal shipping is up 6.5%, the strongest gain in two years. Big names in the industry are expected to report strong growth this year. Schneider National’s is expected to grow revenue 6.8% and JB Hunt is expected to grow intermodal revenue between 7.5% and 11%.

But rates are going to be difficult to sustain going forward, according to Gross.

“Because the trucking situation is going to begin to normalize, it’s going to be a much more challenging situation for intermodal. We’re not going to see the kind of large you over year increases in rates that we did in 2018.”

Helping the industry along has also been the fear of tariffs, which has encouraged front-loaded import demand. This tailwind has seen container volumes coming into North America through August up 5.2% on the year. This “carryforward” will likely only have a temporary effect, however. Gross continued:

“There’s been strong performance for containers, but question is whether that actually reflects freight that was moved earlier than normal, either because of tariffs or fears of congestion or delays at ports.”

As this slowdown in the industry looms, transportation stock indicators are all near, or at, record highs, with the Dow Jones Transportation average and the S&P 500 transportation index both near all time highs. Yet while rail companies have showed continued strength this year, with the S&P 1500 rail index up as much as 23% in January, the S&P 1500 trucking index was down almost 13% as the market sniffs out the inflection point.

Why the divergence between trains and trucking? Yardeni Research’s Ed Yardeni said that he believes the differentiation was due to higher labor costs and fuel prices having a more profound effect on trucking versus rail. He also believes that the gap between rail and trucking could continue until either automation or a recession comes along.

“I am fairly certain we saw movement of cargo early as August is the peak for volume, but July was higher than August,” Larry Gross concluded. “The rest of 2018 may see see more restrained growth because of the early cargo movement.” The final outcome may be far worse should trade war between China and the US escalate further, crippling trans-Pacific trade and resulting in much lower trade volumes just as the rush to get ahead of tariffs finally fades.

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