As the US economy recovers, the local freight trucking industry growth is expected to pick up pace in line with returning demand
Los Angeles, California (PRWEB) November 10, 2011
Traditionally, trucking has been the big winner when the economy recovers from a recession. As such, IBISWorld, the nation’s largest publisher of industry research, forecasts that revenue for the Local Freight Trucking industry will grow at an average annualized rate of 3.2% to reach $45.0 billion in the five years to 2016. Freight volumes available to the industry are projected to rebound as the economy returns to growth in line with recovering consumer confidence and increased spending. Consequently, in 2012, revenue is forecast to increase 3.2% as consumers buy more physical goods, causing downstream industries to require additional shipping. As Americans release pent-up spending in 2012 and beyond, revenue will leap higher.
As the recession worsened, sluggish manufacturing production and slow retail spending reduced demand for the Local Freight Trucking industry. Declining demand caused operators to engage in price competition, which limited profit margins. Also, soaring diesel costs dramatically reduced profitability in 2008, despite the fuel surcharges that many industry operators implemented. In 2011, margins are expected to increase to 3.9% of revenue due to rising demand; however, profit will remain below prerecession levels because of continued price competition and rising fuel costs.
The local freight trucking industry was particularly hurt in 2009, when revenue declined 14.9% due to reductions in consumer spending, construction activity and manufacturing production. Furthermore, a drastic reduction in diesel prices in 2009 caused revenue from fuel surcharges to decrease during the year. While revenue from fuel surcharges has since increased along with fuel prices, industry demand remains relatively weak. Consequently, revenue is expected to fall at an average annualized rate of 2.0% to $38.4 billion during the five years to 2011. In 2011 alone, IBISWorld expects that recovering demand and increased fuel surcharges will increase industry revenue by 3.7%.
Nonemployers comprise about 87.6% of industry firms. These small firms, which generate 34.6% of revenue, were particularly susceptible to the recent decline in demand. Poor operating conditions caused many firms to record losses in 2008 and 2009, and some operators were forced out of the industry. In the five years to 2011, the number of firms is expected to decline by 0.5% annually to total 215,491. Similarly, reduced demand has also caused industry employment to fall 1.5% annually during the five years to 2011.
The Local Freight Trucking industry has a low concentration due to the relative ease of entry and exit. According to IBISWorld, the largest players include, YRC Worldwide Inc., Con-way Inc., J. B. Hunt Transport Services Inc., Schneider National Inc., Landstar System Inc. and Werner Enterprises Inc.
According to IBISWorld analyst, Lauren Setar, as the US economy recovers, the local freight trucking industry growth is expected to pick up pace in line with returning demand. “Trucking industries have struggled to attract enough drivers to meet demand prior to the recession,” says Setar. “The recession's negative effect on demand has offset these staffing problems, which is expected to continue during the next five years.” In the five years to 2016, IBISWorld projects that industry revenue will increase at an average annualized rate of 3.2% to total $45.0 billion.
For more information, download the full report from IBISWorld on the Freight Trucking industry
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