1 2015: More of the Same? Or is a Lull Out There? “A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.” ‐Winston Churchill Agenda: What Happened in 2014? And What Will the 2015 Encore be Like? Capacity: Across the Modes & Influences E‐Commerce: Think Behavior Economy: Beyond the Obvious Capacity Crunch: How Much?... …And For How Long? Photos from BB&TCM
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1
2015: More of the Same? Or is a Lull Out There?
“A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.”‐Winston Churchill
Agenda:What Happened in 2014?
And What Will the 2015 Encore be Like?Capacity: Across the Modes & Influences
E‐Commerce: Think BehaviorEconomy: Beyond the ObviousCapacity Crunch: How Much?...
…And For How Long?
Photos from BB&TCM
2
2014 in Synopsis—What a Year!
Source: BB&TCM; Microsoft Office 2010 for exclamation point
Weather1) Networks out
of kilter2) Killed older
capacity
HOS: 3% Hit (really?)
IP Accelerated
Easy Comps vs. late 2013
May onward: port strike fears
Rail Service meltdown: ~150,000 loads left rails first 11 weeks of 2014; thousands thereafter Nov/Dec: good finish to
the year
3
We’re Transitioning from a “Square Root” Recovery to Something Just Short of a “Hockey Stick” Recovery
Source: GDP figures from BEA website; commentary BB&TCM; photos from Microsoft Office 2010
US GDP has grown 3.5% or higher in four of the last five quarters after ZERO quarters of 3% GDP growth since 2010; the economy is healing in spite of Washington, DC!
4
From Q4’13 Onward, IP Really Picked Up
Source: BB&TCM analysis and comments of Federal Reserve Board IP data
When IP dips below 3%, freight volumes get sloppy
In the five quarters before Q4’13, IP averaged 2.5% growth, with one quarter (Q1’13 at 4.2%) subsidizing that stretch
IP is more important to freight creation than GDP
Example: Q1’14 GDP shrank 2.1%, but IP grew 3.9%
Many GDP components create minimal freight—e.g., tax, law, consulting, entertainment, education, healthcare, etc.
2.5%
4.9%
3.9%
5.7%
4.1%
5.6%
0%
1%
2%
3%
4%
5%
6%
Q3'12‐Q3'13
Q4'13 Q1'14 Q2'14 Q3'14 Q4'14E
Industrial Production
5
And the Freight Components of GDP Accelerated
Source: BB&TCM analysis of Bureau of Economic Analysis (BEA) GDP data; measures point contribution to GDP growth (e.g., GDP grew 4.6% in Q2’14 and equipment was 63 bps of that growth)
Retailers: Brick and Mortar isn’t what it used to be
Source: Company filings. Photo from Microsoft Office 2010
22
The Economy: Beyond the Obvious
Source: Microsoft Office 2010 for cartoons
23
Households are Deleveraging…
36%
69%
93%
107%
112%
135% 13
8%13
1%12
9%12
4%12
4%12
5%12
3%12
0%11
8%11
7%11
6%11
6%11
6%11
5%11
4%11
4%11
3%11
2%11
2%11
1%11
0%11
0%10
9%11
0%10
9%10
8%
40%
60%
80%
100%
120%
140%
160%
1952
1993
2003
2006
2008
Q2'
09Q
4'09
Q2'
10Q
4'10
Q2'
11Q
4'11
Q2'
12Q
4'12
Q2'
13Q
4'13
Q2'
14
Total Household Indebtedness
Source: Federal Reserve Board (FRB). Both measure household debt in different ways. The right table shows that total household indebtedness as a percent of disposable income has fallen to 108% from 138% in 2006. Photo from Microsoft Office 2010
9
9.5
10
10.5
11
11.5
12
12.5
13
13.5
14
3/31
/198
0
3/31
/198
2
3/31
/198
4
3/31
/198
6
3/31
/198
8
3/31
/199
0
3/31
/199
2
3/31
/199
4
3/31
/199
6
3/31
/199
8
3/31
/200
0
3/31
/200
2
3/31
/200
4
3/31
/200
6
3/31
/200
8
3/31
/201
0
3/31
/201
2
3/31
/201
4
Deb
t Ser
vice
Rat
io
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
19
19.5
20
FOR
Rat
ioDebt Service RatioFinancial Obligations Ratio
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…And Bank Lending is Improving
Source: Federal Reserve Board. C&I = commercial and industrial, RE = real estate
7.7%
-1.0%
3.5%
0.8%
-20% -10% 0% 10%
C&I loans
RE loans
Consumer
Credit cards
2013 2012 2011 2010 2009
25
149%188%
308%61%
72%85%
120%58%65%
37%107%
64%219%
53%82%
93%94%
43%
0% 50% 100% 150% 200% 250% 300% 350%
2013
2011
2009
2007
2005
2003
2001
1999
1997
Household Formation Ratio to Housing Starts
Long‐Term Positive: Household Formations are Running Way Above Housing Starts (Huge student loans holding housing back)
Source: US Census Bureau and BB&TCM analysis; photo from Microsoft Office 2010
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But Spending Patterns Have Changed Since 2007
Source: BB&TCM commentary; Bureau of Labor Statistics for US middle‐income spending data
Since 2011, Construction has Hired 704,000 Workers—Up to 160,000 were ex‐Truck Drivers
Source: BLS, December 2014 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts
Year TotalConstructionJobs (000s)
ResidentialConstructionJobs (000s)
Non‐Resid.Jobs(000s)
2002 ‐85 88 ‐173
2003 127 161 ‐34
2004 290 230 60
2005 416 268 148
2006 152 ‐62 214
2007 ‐195 ‐271 76
2008 ‐789 ‐515 ‐274
2009 ‐1,047 ‐428 ‐619
2010 ‐192 ‐131 ‐61
2011 144 50 94
2012 114 58 56
2013 156 116 40
2014 290 132 158
97%
0
500
1,000
1,500
2,000
2,500
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
20%
40%
60%
80%
100%
120%
140%
Housing Starts Driver Turnover
97%
39%
127%136%
20%
40%
60%
80%
100%
120%
140%
160%
00:Q
1
00:Q
4
01:Q
3
02:Q
2
03:Q
1
03:Q
4
04:Q
3
05:Q
2
06:Q
1
06:Q
4
07:Q
3
08:Q
2
09:Q
1
09:Q
4
10:Q
3
11:Q
2
12:Q
1
12:Q
4
13:Q
3
14:Q
2
2%
4%
6%
8%
10%
12%
Driver Turnover Unemployment Rate
Construction hiring picked up a bit in 2013, with further acceleration in 2014Lots of cash payments in 2012 and absorption of late ‘11‐early ‘12 hiringDrivers are targeted for hiring
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It’s Paid to be Almost Anything but a Driver!
Source: BB&TCM analysis, Bureau of Labor Statistics; photo from Microsoft Office 2010
Heavy and Tractor‐Trailer Truck DriversConstruction LaborersFood Prep and Serving Related OccupationsAutomotive Service Technicians and MechanicsRegistered Nurse
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Would you Take This Job if this Was Your 40‐Year Wage Trend?$2
4.81
$21.96
$21.38
$19.68
$10
$13
$16
$19
$22
$25
$28
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Average Hourly Driver Wages (inflation adjusted)
Source: BLS. Figures are inflation‐adjusted (using 2013 dollars) and reflect union and non‐union drivers.
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Is the Driver Challenge Worse? Yes and no…
Source: BB&TCM analysis of public carriers CGI, CVTI, JBHT (truck only), KNX, MRTN, SWFT, WERN and 2 private carriers; photo from BB&TCM