Price Forecast: Local Freight Trucking Services

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Recent Price Trend - Local Freight Trucking Services


During the three years to 2017, local freight trucking prices have been growing at an estimated average annual rate of 1.7%. Demand growth has led to higher service prices, but high competition, stable wage costs and falling fuel costs have tempered the pace of price growth.

This market’s carriers transport nearly all consumer goods during the initial or final phases of their distribution. Thus, trends in consumer spending determine demand for market services from wholesalers and retailers, which together account for about one-third of carriers’ sales. Moderate growth in consumer spending has contributed to demand growth for local trucking services. Further indicators of moderate demand growth include annualized growth in the IPI, which can be used as a measure of demand from the manufacturing sector, and total trade value, which can be used to measure demand from international shippers.

At the same time, suppliers’ fuel costs have dropped in line with crude oil prices. Carriers’ wage costs have been stable. These input cost trends have mitigated some of the upward pressure on price. In addition, this market is highly fragmented and contains a vast number of carriers, indicating a high level of price-based competition. Competition has limited carriers’ ability to raise prices, which has kept buyers’ purchasing power moderate and stable.

In addition to mild growth, market prices have been exhibiting little volatility during the past three years. Because fuel surcharges have declined overall, they have not significantly impacted the volatility of prices. Low price volatility improves buyer power by increasing the accuracy of purchasing budgets. Low price volatility and subdued price growth have also limited the penalties associated with ad hoc shipping. Carriers tend to be more willing to reduce rates for buyers that can guarantee a steady revenue stream rather than purchasing one-time shipments, but recent market trends have allowed short-term buyers more leverage to earn lower prices.

 



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