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There are several things that could hasten the demise of the great
freight environment.
One of those, both Vieth and Costello said, is if trade skirmishes
become an all-out trade war.
The National Retail Federation is also concerned about what
tariffs will do to commerce.
That being said, however, the number of imports at the nation’s
major retail container ports have set two new records highs this
summer and are expected to set another record high for August,
according to the monthly Global Port Tracker report released August
9 by the National Retail Federation and Hackett Associates.
Tax reform and a thriving economy are mostly driving retail sales,
the report said, but part of it seems to be concern over what’s to come
as far as tariffs and trade policies.
Then there’s the supply-and-demand seesaw.
“You know, the higher the cliff the bigger the fall,” Vieth said.
“Our model says that there are about the number of tractors in the
field today relative to the work to be done.”
On the other hand, from this past March to May, the build-out of
tractors decreased because parts manufacturers couldn’t find enough
workers. In June, there was an uptick as more tractors came off
the assembly lines with all their needed components. Before that,
tractors coming off the line were missing various cab components,
even windshields, Vieth noted.
A significant concern he has is the rate of inflation, which could
also blunt the freight boom. Then there are factors like the health of
other industries that impact trucking, like the housing market.
“We just saw the housing starts in the building permits numbers,”
he said, and “they were kind of soft, and the rising interest rates and
the inability to find construction workers and rising home prices”
could mean the economy is starting to slow down.
By the third quarter of 2019, certainly, this freight up-cycle is
“going to be kind of long in the tooth,” Vieth said.
At some point, the industry’s ability to attract drivers will go up
and “at some point freight’s going to roll over and those two lines
will cross. So it’s not a question of if, it’s a question of when.”
A bellwether of when that will happen has to do with interest
rates, Vieth explained.
“Bankers borrow money at short-term rates and they lend money
at long-term rates.” So as long as long-term rates are higher than
short-term rates, things are OK. But “when you get the yield curve to
where the short-term rate is higher than the long-term rate, bankers
are no longer making money on lending.” When that happens,
credit conditions tighten as banks stop lending money, capital dries
up, projects sit for lack of funding and the economy heads toward
recession.
But then nobody has a crystal ball. So stay tuned.
MAN WITH A PLAN
Rep. Bill Shuster, chairman of the House Transportation and
Infrastructure Committee, has drafted “Building a 21st Century
infrastructure,” which isn’t a bill, rather a product of vast amounts
of discussion that have already taken place among his legislative
colleagues from both sides of the aisle, as well with numerous
stakeholders from throughout the nation, he said.
Set to retire next year, Shuster hopes his plan will spur Congress
to finally come up with an infrastructure bill.
The problem, Shuster wrote, is political and bureaucratic red tape
that can delay progress for years, especially when so many opinions
are being floated.
He said the draft is meant to reignite discussions amongst his
colleagues, and he urged “all members to be open-minded and
willing to work together in considering real solutions that will give
America the modern-day infrastructure it needs.”
It calls for the formation of a Highway Trust Fund Commission
that will recommend to Congress ways to achieve long-term solvency
of the HTF, as well as for a provision that allows for Congress to
expedite consideration of legislation on the matter.
The discussion plan calls for the establishment of a national,
volunteer-based pilot program to see whether a per-mile user fee
could be a viable replacement for the existing user fees on gasoline
and diesel. The volunteer-based program would be administered by
the Secretary of Transportation in coordination with the Secretary of
the Treasury.
It also calls for an increase in federal user fees on gasoline and
diesel by 15 and 20 cents, respectively, phased in over a three-year
period, along with similar user fees on alternative fuels. The tax
would end in 2028.
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