Rising costs more of a threat to motor carrier profitability than declining freight volumes

by Canadian Shipper

The threat of economic recession is still more a media-manufactured phenomenon than a statistical reality, the latest economic figures show. What’s hurting motor carriers more than a recession-driven slowdown in freight volumes is rising costs.

Manufacturing shipments in rose 0.3 per cent, to $45.0 billion, in January, the latest month for which Statistics Canada figures were available at press time.

Shipments increased in 11 of the 21 major groups in January, representing 63.6 per cent of total shipments, and five provinces and the territories also reported higher monthly values. There were particularly strong gains in the aerospace product and parts and chemical industries.

Gross domestic product also rose 0.3 per cent in January, the same pace as in December. Most sectors of the economy made gains in January, according to Statistics Canada. Wholesaling and retailing activity advanced; there were broad-based increases in the retail sector, while computers were chiefly responsible for the strength in wholesaling. Oil and gas exploration activity continued to buoy the mining sector. The construction industry was busy; housing starts increased to their highest level since 1994.

The latest performance statistics available for the for- hire carrier industry are for the fourth quarter of 2000 and deal with trucking companies earning $25 million or more annually. These top carriers grew their revenues an average of 11 per cent, compared with the fourth quarter of 1999.

But there are definite concerns. The revenue improvement was offset by an average increase in expenses of 12 per cent.

On average, top carriers continued to pay more for fuel, 28 per cent more than in the fourth quarter of 1999.

The operating ratio (operating expenses divided by operating revenues) for all top for-hire carriers deteriorated to 0.95 compared to the 0.94 ratio posted in the fourth quarter of 1999 (a ratio of greater than 1.00 represents an operating loss).

There is also some reason for concern about the manufacturing sector, the main source of freight shipments. The new year has greeted manufacturers with some uncertainty, as contract cancellations and market pessimism resulted in erosion of both unfilled orders and new orders in January. Unfilled orders declined 2.3 per cent to $48.6 billion, the third consecutive drop, while new orders decreased 1.3 per cent.

Have your say

We won't publish or share your data