“2021 will be a story of contending tailwinds and headwinds,” says U.S. Xpress in a blog post about its 2021 Economic Forecast.
The forecast, from one of the country’s largest and most forward-looking truckload fleets, looks at economic indicators such as GDP, unemployment, Class 8 truck orders and the Logistics’ Managers Index. It discusses four key factors that will drive freight markets over the coming year: inventory restocking, the available supply of drivers, ramped up government spending, and the overall health of the country’s economy.
“Over the course of the COVID-19 pandemic, a common theme throughout our analyses and forecasts of economic data has been the heightening of dynamics that were already in play,” notes the blog. “Driver shortages, capacity crunches, and ample freight (driven by evolutions in buying habits) were the common themes of 2020. By and large, 2021 looks to offer more of the same. The chief determinant, of course, is the trajectory of the pandemic.”
Four key insights from the forecast, which can be found on the U.S. Xpress blog, are:
1. Fewer drivers, more stimulus funding will continue to reduce truckload capacity
Reduced commercial driver training and licensing due to the pandemic, plus the Drug & Alcohol Clearinghouse, have resulted in nearly 200,000 fewer drivers as we enter 2021, according to U.S. Xpress. Additional government stimulus dollars could keep even more from starting a driving career or coming back to the trucking industry. This will likely result in decreased capacity and more driver pay increases.
2. Freight activity remains hot, but economic growth cools
While Wall Street is bullish on a 2021 economic recovery, the ongoing pandemic and slow vaccination efforts will temper growth for the first half of the year. Inventory replenishment will remain a strong focus for shippers for months to come. Additionally, record-breaking holiday shopping will result in increased returns during the first part of the year, and more households will continue using online platforms for key purchases as physical retail remains shuttered. As the COVID-19 vaccine rolls out to more of the population and coronavirus cases slow, U.S. Xpress says, anticipate a steady recovery into the second half of the year.
3. Ramped-up government spending
Now that Democrats control the White House and both chambers of Congress (albeit by slim margins), 2021 will usher in an entirely new slate of policy prescriptions that could have wide repercussions for the trucking industry, U.S. Xpress said.
Additional unemployment assistance and stimulus dollars will stimulate consumption (and bolster freight volumes) while sidelining drivers from returning to the labor market. A proposed increase in mandatory insurance minimums for carriers could drive many smaller players out of business. Additionally, the new administration is planning a bold infrastructure program which will spur a slew of construction projects across the country that could induce drivers to leave the labor market for jobs closer to home. These factors could have long-term ramifications impacting demand into 2022 and beyond.
4. Contract and spot rates to increase
The combination of fewer drivers, increased freight demand and reduced capacity will result in contract rates to increase between 8 to 15% during 2021, U.S. Xpress predicted. Spot rates will likely trend upward until the fall months, when they’ll ease prior to increasing again as we enter the holiday peak season.
“The coronavirus pandemic continues to impact our industry in ways we couldn’t have imagined a year ago, and those challenges will reverberate throughout 2021,” said Eric Fuller, president and CEO of U.S. Xpress, in a news release. “I’m proud of our men and women who have been on the front lines, delivering essential goods throughout this pandemic. This will continue to be a challenging year, but I’m confident it will end on a positive note.”