The potential trade war has been sparking considerable concern within the freight and logistics sector. With sanctioned countries threatening and even enacting their own forms of punitive retribution, many are wondering what the overall effects of the tariffs and trade restrictions will be on the industry as a whole.
The growing shortage in the trucking industry is also becoming a more significant problem.
Tariffs aren’t the only problem, however. The growing shortage in the trucking industry is also becoming a more significant problem. As a large portion of the trucking community is approaching retirement age, trucking companies are scrambling to find new bodies to take up the wheel. Despite these issues, the economy is enjoying a period of solid growth for the start of the third quarter, but according to a series of surveys conducted by the government, we might be looking at a hard cap on performance in the future.
“Responses from the Federal Reserve’s Beige Book and data from regional business surveys continue to point to an economy that is growing at a healthy pace, as a pickup in consumer spending and continued strength in business investment have sustained activity in the 2nd quarter. However, a, look at the details within the surveys suggest that demand in the economy is actually stronger, and the inability to find carriers to move the available freight has led to production delays and unfilled orders,” says FreightWaves.
Same Report from Around the Country
The upshot is that the Beige Book shows a continual, albeit modest, growth in the economy across the country. However, there are a number of regional business centers that have concerns about the new tariffs and the trucking shortage. The surveys highlight that each of the 12 major business districts is seeing higher levels of consumer spending through June and early July. This has created a talent shortage, leaving many companies scrambling to find qualified workers to fill the required positions to sustain the growth.
Among the top tariff concerns is the potential for escalation into an all-out trade war with China. The announcement of the tariffs and China’s response to them have increased the pressure for manufacturers over the past several weeks which are cutting into profit margins as companies have yet to start passing the bill to their customers. “Respondents in each district called attention to the tariffs, with one respondent from the Philadelphia district noting ‘that the effects of the steel tariffs have been chaotic to its supply chain—disrupting planned orders, increasing prices, and prompting some panic buying.’ Several districts noted that the tariffs had not had a material effect on demand or business activity, however, with respondents from Boston citing ‘concerns about tariffs but none cited trade issues as affecting demand or hiring and capital expenditure plans,’ FreightWaves explains.
The Effect of Capacity on Performance
Half of the Federal Reserve districts have cited the shortage of trucking capacity. Specifically, the shortage of commercial drivers has caused a disruption in supply chains and business in the past few weeks.
Given how connected the supply chain is to all aspects of the commercial industry, the driver shortage is causing a cascade effect for a number of businesses.
Given how connected the supply chain is to all aspects of the commercial industry, the driver shortage is causing a cascade effect for a number of businesses. The Boston retail sector, for example, notes that due to their own labor shortages combined with higher freight costs caused a 10 percent increase in labor costs compared to the rates over the same time last year. “Results from all three districts also showed that manufacturers continue to struggle to fill orders in the sector. Data from the regional indexes showed that unfilled orders were rising in all three districts, with the Philadelphia district reporting almost a 14-point jump. This continues the recent trend of rising order backlogs and orders that cannot be processed and would suggest that growth in the economy would be even stronger if only companies could find the workers, supplies, and capacity to meet all of the existing demand,” FreightWaves concludes.
Demand for freight is high, and the economy is continuing to grow which means a potential opportunity for the industry as a whole, so long as the can overcome the challenges ahead.
Many firms in the trucking industry are looking for ways to help mitigate the hardships brought about by the driver shortage including higher wages for drivers. Until they can better tap into the younger generations for new drivers, the driver shortage will continue to grow as more drivers reach retirement age. As for the tariffs and the potential for a trade war with China, the best option is for manufacturers to begin sourcing other suppliers for materials or decide how best to negate the increased costs. While this all seems rather dire, there is a considerable upside to this. Demand for freight is high, and the economy is continuing to grow which means a potential opportunity for the industry as a whole, so long as it can overcome the challenges ahead.
Preparing For Upcoming Challenges
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