The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Transportation Keeps On Truckin'
On September 24, the Atlanta Fed’s Advisory Council on Trade and Transportation met, as it does twice a year, to discuss current economic conditions in the various industries represented by transportation executives from across the Sixth Federal Reserve District. Dave Altig, the Atlanta Fed’s executive vice president and director of research, provided an economic overview and outlook, and the Jacksonville Branch’s Regional Executive Chris Oakley and Atlanta Fed President Dennis Lockhart facilitated the discussion.
The general tone of the conversation was one of cautious optimism, though some slowing in growth was reported since the last meeting in April 2013. Half of the council members reported higher year-over-year demand, and the other half indicated that activity was flat. The outlook for the next three to six months was split evenly as well, with some expecting higher levels of activity based on recent trends and the upcoming peak season for holiday shipping. Regarding inventory levels, council members indicated that supply chains remain lean and that these conditions will likely become a long-term strategy. Frustration with the regulatory environment and current fiscal issues that were raised in the several past meetings continue to be expressed.
At Sixth District seaports, activity was reported as mixed, with minimal cargo growth and a slowing of exports at one port; the export of chemicals and energy products was characterized as “off the charts” by another council member, who also claimed higher levels of container trade and imports of steel, coffee, rubber, and plywood.
There was not much new news regarding labor markets. Compared with the same time last year, three council members reported higher workforce levels, three reported the same, and two reported lower levels of staffing. The employment outlook over the short term is the same as it was in April, with half of the council members anticipating higher levels and only one member expecting lower. The proportion of part-time or temporary workers was described as the same across the board.
Hiring challenges remain in trucking. Diesel mechanics and drivers are hard to find for various reasons, including the inability of the industry to attract the younger generation. Additionally, the industry faces a wave of vacancies over the coming years as a result of pending retirements. Hours of service regulations that went into effect in July 2013 are affecting the utilization of trucking equipment between 2 percent and 10 percent and overall capacity by approximately 25 percent.
Fuel price increases earlier this year have had no discernible effect on current or projected cargo volumes at Sixth District ports; marine fuel prices, although high, have been relatively stable for an extended period. Because of declines in freight, decreased demand, and a sagging global economy, air freight carrier revenue has not been buoyed by a recent 9 percent decrease in global jet fuel prices. For those motor carriers that are not hedged on fuel, higher prices have had a material effect on business.
The majority of council members indicated that they have already or will be initiating slight near-term price increases through annual rate adjustments, at a minimum, to cover rising input costs including driver wages and health care costs. Longer term, most anticipate more aggressive pricing as market conditions allow, compensating for increases in equipment and regulatory costs.
Council members’ outlook for growth over the next three to six months mirrors the responses from April: 75 percent expect higher growth, and the remaining 25 percent anticipate the same level of growth. In the medium term, two-thirds of the council members expect higher rates of growth, with the remaining anticipating the same rate of growth. Much like our conversations with other business leaders throughout the region, however, economic and policy uncertainty clouds the council’s outlook.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed’s Jacksonville Branch
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