A look at the 2021 truckload market
As we begin the second half of 2021, the logistics industry is still experiencing the effects of an unpredictable economic environment. In 2020, the unemployment rate reached the highest rate since the Great Depression, followed by the fastest recovery in history. Fiscal and Monetary spending reached unprecedented levels to help avoid the worst of the economic downturn and hasten the recovery. Consumer spending hit all-time highs while inventories reached all-time lows. Supply shortages have affected everything from consumer electronics to automobiles to housing and everything in between. With all this uncertainty, what are the expectations for the remainder of 2021?
It’s no secret that the logistics industry has experienced a capacity crunch throughout 2021. According to BMO Transportation Finance, five of the first six months of the year saw 100% utilization of all seated class 8 trucks. The second half of the year is forecasted to see a similar trend, with an average utilization rate of 99% compared to a 10-year average of 91%.
In response to the capacity constraints, new orders for class 8 trucks have exceeded a 100% YoY increase for 9 consecutive months, but supply shortages of input materials, such as steel and semiconductor chips, have made it difficult for manufacturers to produce trucks fast enough to keep up with demand. Deliveries of new trucks are expected to make a material impact on capacity in Q1 2022, as the class 8 utilization rate drops below 98% for the first time since Q4 2020.
Spending up/Inventories down
Driven by boosted unemployment benefits and stimulus payments, consumer spending and net worth reached historical highs in the first half of 2021. Retail sales experienced 10%+ YoY growth for the first 5 months of 2021, including 20%+ in March and May and nearly 50% in April. This boost in spending saw inventories (especially retail inventories) drop to historical lows, while supply shortages and capacity constraints have made it difficult for restocking to keep pace. Inventory levels saw a slight increase in May from their low point in April but are still exceptionally low and are expected to remain low throughout the remainder of 2021.