As 2019 comes to a close, experts are sounding off on their predictions for the trucking industry in 2020. Unfortunately, these predictions aren’t too positive, as many expect 2020 to be a “tough year” for U.S. trucking. However, it isn’t all doom and gloom, as some have noted that 2020 won’t be a difficult year so much as a return to normalcy after several years of record growth.
2018 saw a substantial boost in activity and two of the most profitable quarters in trucking history, largely due to 2017’s tax cuts. However, 2019 brought less sunny conditions, and industry insiders like Americas Commercial Transportation (ACT) Research predict that 2020 will be a “significant correction” after a period of booming growth.
Preliminary North American Class 8 orders fell 21% from October to November in 2019, as Class 5-7 orders fell 8% month-over-month. The Class 8 orders were the lowest total for November since 2015, and 39% lower than those of November 2018. September’s manufacturing index dropped 1.3 points from the previous month, and manufacturing productivity is continuing to stagnate.
Fleets are becoming much more cautious when ordering as they head into 2020 due to 2019’s stalled growth. They’re only placing small orders, and only for the first quarter. Class 8 builds are expected to drop 31% in 2020, with productivity expected to remain negative until 2022.
Declining spot rates, low freight demand, overcapacity, rising fuel costs and carrier bankruptcy are all predicted for the upcoming year, along with an economic contraction or even recession.
The main reason for the trucking industry’s gloomy predicament is the looming trade war between the U.S. and China, as tariffs have led to an already-underway industrial and freight recession. Manufacturing has receded as prices are destabilized and supply chains are hindered by growing apprehension among the industry. As Don Ake, FTR vice president commercial vehicles, put it, “the [transportation] industry thrives on stability, but we are now on a rocky road.”
However, the 2020 forecast isn’t all negative, as analysts also predict positive changes such as technological improvements and increasing urbanization, both of which will nurture growth for trucking businesses. Additionally, not everyone is worried about the future of trucking, as Joseph Evangelist of American Trucker states , there is “not going to be a drop off the cliff but rather somewhat of a return to more normal levels. [And] normal in trucking is still pretty darn good.”
It remains to be seen what 2020 has in store for the U.S. trucking industry, but, as industry analysts agree, it will largely depend on how the trade war unfolds, as it could potentially keep the U.S. economy out of a recession, or plunge the country into one. If the economy can avoid a recession, the vice president and senior analyst of ACT Research, Tim Denoyer, believes that capacity may just rebalance and spot truckload rates could potentially turn positive in 2020.