In addition to industry expectations for rail volume growth, stakeholders will be watching how rail service improves in the coming year. Those improvements in service will come in part from adding the resources to grow capacity, including efforts to expand the workforce.
“We definitely saw some progress on the hiring process, but it took the first half of the year to get where they were just treading water,” FTR vice president for rail and intermodal said.
FTR’s analysis comes at a time when inflation remains the elephant in the room, although there could be a potential cooling in the months ahead, according to FTR vice president for trucking. Consumer spending is also holding up, with an increase in services expenditure offsetting some mild decreases in outlay for goods.
Meanwhile, industrial production is anticipated to be flat, although production has been running above pre-pandemic levels, according to FTR vice president for trucking.
Although U.S. imports have slowed dramatically in recent months, the effects of that differ based on the region. California ports have been hardest hit by the import slowdown, due in part to congestion from earlier in 2022 and also the labor situation at West Coast ports, where International Longshore and Warehouse Union members have been working without a new contract since last July.
“California obviously is taking the brunt of what’s going on from an import perspective,” said FTR Chief Intelligence Officer.
In contrast, import activity in the U.S. Southeast has started to ease back but not to the extent of California, while Gulf Coast container activity remains robust, FTR Chief Intelligence Officer said. In the trucking space, diesel prices and insurance are expected to put pressure on carriers, particularly those that operate primarily in the spot market, FTR vice president for trucking said.
“The question is whether we will continue to see moderation [in diesel prices],” FTR vice president for trucking said.
New carrier formation surged just after the lockdown period of the COVID-19 pandemic, but the decline in diesel prices contributed to the number of new carriers trending lower in 2022. And while the contract sector has been able to absorb some of that loss, “that doesn’t look as likely to happen [in 2023],” FTR vice president for trucking said.
According to FTR’s estimate for active truck utilization, which the group says serves as a market tightness barometer, the utilization rate stayed high in 2021 and into the first couple of months in ’22 before falling sharply below a 10-year average. FTR vice president for trucking believes that rate could continue to soften over the next several months, potentially bottoming out around the third quarter of this year.
But if the U.S. economy recovers heading into 2024, the trucking utilization rate could see a steeper upside as it seeks to catch up going into the new year, FTR vice president for trucking said.