Bob Costello American Trucking Associations

Bob Costello American Trucking Associations

Economic & Trucking Industry Update August 7, 2018 Bob Costello Chief Economist & Senior Vice President of International Trade Policy & Cross-Border Ops American Trucking Associations @ATAEconBob

Business Cycles U.S. Expansions Duration October 1949 - July 1953 May 1954 - August 1957 April 1958 - April 1960 February 1961 - December 1969 November 1970 - November 1973 March 1975 - January 1980 July 1980 - July 1981 December 1982 - July 1990 March 1991 - March 2001 November 2001 - December 2007 June 2009 - Current 109+ Average 65 0 20 40 60 80 100 120 140 Months Sources: National Bureau of Economic Research and ATA

Real Gross Domestic Product Growth 4% 3% 2.7% 3.0% 2.7% 2.2% 2.3% 2% 1.5% 1% 0% Avg 2000-2007 Avg 2010-2015 2016 2017 2018 2019 Sources: BEA & ATA

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 The Drivers of Truck Freight, Plus Inventories 7.0 Unemployment Rate (Percent) 1.4 Total Housing Starts (Millions) 106 Factory Output (Index) 1.45 Inventory to Sales Ratio 6.5 1.3 6.0 104 1.40 5.5 1.2 5.0 1.1 102 1.35 4.5 1.0 4.0 100 1.30 3.5 0.9 3.0 0.8 98 1.25 Sources: BLS, Census, and Federal Reserve

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 400 Monthly Job Changes (Thousands) Job Market 7.0 Unemployment Rate (Percent) 350 6.5 300 6.0 250 5.5 200 5.0 150 100 50 4.5 4.0 3.5 2015 2016 2017 2018 5.3% 4.9% 4.4% 3.9% 0 3.0 Sources: BLS & ATA

2010 2011 2012 2013 2014 2015 2016 2017 2018 Thousands U.S. Economy is at Full-Employment 16,000 Unemployed and Job Openings 14,000 12,000 10,000 Unemployed Job Openings 8,000 6,000 4,000 2,000 0 Sources: Department of Labor

5% 4.7% Employment Costs Wages & Salaries 4% 3% 3.2% 2.5% Benefits 2.3% 2.4% 2.6% 2.2% 3.4% 3.0% 3.5% 3.2% 2% 1.8% 1.6% 1.6% 1% 0% Avg 2000-2007 Avg 2010-2014 2015 2016 2017 2018 2019 Sources: BLS & ATA

Real Personal Consumption Growth (Goods Only) 5% 4.6% 4% 3.7% 3.9% 3.7% 3% 3.3% 3.0% 2% 1% 0% Avg 2010-2014 2015 2016 2017 2018 2019 Sources: BEA & ATA

2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Single-Family Housing Starts Will Continue Their Upward Climb 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 Total Housing Starts (Monthly; Annualized Rate; Millions) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 Single-Family vs Multi-Family Units (Monthly; Annualized Rate; Millions) Single-Family Multi-Family 0.4 0.0 Sources: Census & ATA 2015 2016 2017 2018 2019 H.S. 1.11 M 1.18 M 1.21 M 1.34 M 1.41 M

2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Factory Output is Stronger 110 105 100 95 90 Factory Output (Index) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Factory Output (Year-over-Year Percent) Sources: Federal Reserve & ATA 2015 2016 2017 2018 2019 Output 0.2% 0.2% 1.5% 2.9% 3.3%

Total Business Inventory-to-Sales Ratio (Data adjusted for seasonal, holiday, and trading-day differences, but not price changes) 1.55 1.50 1.45 1.40 1.35 Likely Optimal Range 1.30 1.25 1.20 1.15 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Census Bureau

Biggest Risk? A Trade War

Tariff Update Section 301 Tariffs on Chinese Products Response to unfair trade practices related to the forced transfer of U.S. technology and intellectual property. China retaliated and then the U.S. added second round of tariffs Section 232 Tariffs on Steel & Aluminum, including CA, MX, and EU Canada imposing tariffs on $12.8 billion in U.S. goods effective July 1 in response EU to impose tariffs on $3.4 billion of U.S. goods going to EU members Mexico placed tariffs on $3 billion worth of U.S. goods Administration launching a Section 232 investigation into the national security implications of auto imports

50,000 45,000 40,000 35,000 The Economic Risks to Trucking: Trade Wars 2017 U.S. Trucking Employment From Truck Transported NAFTA Trade Non-Drivers Drivers 15,677 $7.0 $6.0 $5.0 2017 U.S. Trucking Revenue From Truck Transported NAFTA Trade (Billions) 47,031 $6.62 30,000 26,981 $4.0 $3.81 25,000 20,000 15,000 20,234 6,683 8,994 31,354 $3.0 $2.0 $2.81 10,000 5,000 13,366 17,988 $1.0 0 Canada Mexico Total $0.0 Canada Mexico Total Source: American Trucking Associations Economics Department

Freight Remains Very Strong (With Year-Over-Year Comparisons Becoming More Difficult)

Total For-Hire TL Loads Index: January 2010=100; 3-Month Moving Average Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck

8% For-Hire Truckload Loads 7% 6% Total TL Dry Van 6.0% 6.4% 5.3% 7.1% 5% 4% 3% 2% 3.0% 2.1% 1% 0% 0.1% 0.8% 2016 2017 Q4 2017 YOY 1st Half 2018 YOY Source: ATA s Trucking Activity Report

Total For-Hire TL Miles Index: 2010=100; Seasonally Adjusted; 3-Month Moving Average Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck

Source: ATA s Trucking Activity Report Dry Van Truckload Average Length-Of-Haul Continues to Fall

Source: ATA s Trucking Activity Report LTL Tonnage Index: 2010=100; 3-Month Moving Average

Industry Capacity Remains Very Constrained

US Retail Class 8 Truck Sales Thousands Includes Tractors & Straight Trucks Source: ATA s American Trucking Trends 2016 & ACT Research

7.0% 5.0% 3.0% 1.0% For-Hire TL Tractor Changes: Large vs Small Fleets Includes company tractors and independent contractor equipment 2016 2017 2018 YTD 5.1% -1.0% -3.0% -1.9% -0.2% -1.0% -5.0% -7.0% -5.0% -5.0% Large TLs Small Fleet: Less than $30 million in annual revenue Small TLs Source: ATA s Trucking Activity Report

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Public Truckload Fleet Capacity 60,000 55,000 50,000 45,000 40,000 Including owner operators, capacity at public fleets is 11% below peak 3Q06 levels; And -7.1% since Q3 2015 35,000 30,000 Note: Source Key Banc. Includes CGI, CVTI, JBHT, KNX (including SWFT), MRTN, USAK, and WERN (excluding acquisitions, if applicable).

Contract For-Hire Truckload Revenue per Mile x FSC Year-Over-Year Growth 2016 2017 Q1 2018 Jan-Jun 2018 Dry Van -3.4% 0.1% 16.0% 18.2% Temp Controlled 1.6% 3.4% 9.5% 12.3% Flatbed -3.0% 2.3% 10.9% 10.9% Tank Truck -1.7% 4.5% 12.8% 15.8% Short-Haul (<500 miles) -0.6% 2.0% 16.6% 17.9% Long-Haul (>1,000 miles) -15.4% 3.7% 12.3% 12.8% Source: ATA s Trucking Activity Report

Rates and Rate Proxies: Contract vs Spot Index: January 2010=100; 3-Month Moving Average Source: ATA s Trucking Activity Report & DAT.com Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck Contract = For-Hire Truckload Average Revenue per Mile x FSC

Contract For-Hire Truckload Revenue per Mile x FSC Year-Over-Year Growth Source: ATA s Trucking Activity Report Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck Contract = For-Hire Truckload Average Revenue per Mile x FSC

Source: ATA s Trucking Activity Report LTL Truck Counts (Index: 2015 = 100)

7% 6% 5% LTL Revenue per Ton Year-over-Year Percent Change 5.2% 6.5% 4% 3% 2% 1.4% 1% 0% 0.0% -1% 2016 2017 Q1 2018 Jan-Jun 2018 Source: ATA s Trucking Activity Report

The Driver Situation Remains Very Difficult

Truck Driver Turnover Rates 100% 83% 98% 96% 95% 93% 81% 87% 94% 75% 50% 50% 52% 25% 0% 8% 9% 8% 9% 11% 11% 11% 9% 9% 10% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TL LTL Source: ATA

The driver shortage is primarily an over-the-road for-hire truckload issue. So how many drivers are in that space? 10 Million CDL Holders 3.5 Million Truck Drivers 1.7 Million Heavy & Tractor-Trailer Drivers 870,000 For-Hire Trucking Heavy & Tractor-Trailer Drivers Based on government data, ATA estimates that there are roughly 500,000 OTR for-hire TL drivers. Source: U.S. Department of Labor

Driver Shortage 51,000 Source: ATA s Truck Driver Shortage Analysis 2017

Source: ATA s Truck Driver Shortage Analysis 2017

Source: ATA s 2017 Driver Compensation Study ATA Driver Compensation Study

WHAT ELSE CAN BE DONE? DRIVE-Safe Act Improve driver efficiency/driving time Reduce driver waiting times 8,500/month to 9,000 = 5.9% 8,500/month to 9,500 = 11.8% Female Drivers

Download ATA s Report for Free at: http://trck.ng/drivershortage

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