Both domestic intermodal loadings and truck freight appear to be weakening in early 2005, according to FTR Associates. Truck freight grew a scant 0.4% year-over-year in February, which is substantially below the 5%-6% increases seen in the first half of 2004. The weakness in truck freight will further impact intermodal loadings as trucking companies take back some of the freight they were willing to give up to intermodal when their own demand exceeded their capacity. Conversely, the short-term intermodal outlook has been impacted positively by freight being imported to the United States as its trade deficit, especially with China, balloons.
Even with a slowdown in freight, truck and rail capacity continue to remain tight. Preliminary estimates show that US tractor capacity in use fell slightly in the first quarter of 2005 but is still at historically high levels. With a preliminary reading of 95.7% recorded in the first quarter of 2005, tractor capacity has averaged 95.4% over the past six quarters. This is substantially higher than the previous peak seen in the first quarter of 1998, when it posted a reading of 91.2% and significantly higher than its historical average reading of 85%. Looking forward, capacity will start to ease throughout the year, falling to 90.5% by the first quarter of 2006. This would suggest further pricing pressure on truck rates at least through the end of this year.
Although FTR had forecasted some slowdown in domestic intermodal loadings and truck freight, the combination of high oil prices, weak job growth, and slowing freight growth possibly indicate a fundamental weakness in the domestic economy. Eric Starks, president of FTR Associates, stated that: “We have been concerned about oil prices and inflation risks for some time now and had been forecasting this type of slowing freight growth. However, we continue to remain optimistic about the economy and expect freight growth to improve as we move through the year. We will continue to monitor the economy closely to identify the impact to US freight growth in the second quarter and the balance of 2005.”