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Feb.09, 2015

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 64 THE JOURNAL OF COMMERCE FEBRUARY 9.2015 MORE SOLID AND steady U.S. economic growth will increase freight demand and boost shipping costs and domestic trans- portation rates in 2015, economists and analysts said at the SMC3 JumpStart 2015 Conference in January. After a year of sharp price increases, shippers at the three-day logistics confer- ence were told to expect to pay even more for truck capacity. Last year was an inflection year for truckload rates, and 2015 "will be the year of real pricing growth," said Ben- jamin J. Hartford, senior equity research analyst at Robert W. Baird & Co. "I think we could see several years of mid-single- digit rate growth on the truckload side. It's all rooted in productivity issues," including a smaller pool of truck equipment, the short- age of truck drivers and tighter regulatory constraints on operations. "We'll certainly see pricing growth in the front half of the year," he said. A lot of that growth "will be demand dependent," he said, as the economy continues to grow at a faster pace. "U.S. growth will be solid," Chuck Clow- dis, managing director of transportation advisory and consulting services at IHS Eco- nomics, told the shipper, carrier, logistics and technology executives at the SMC3 event. IHS expects U.S. gross domestic prod- uct to grow 2.7 percent in 2015. "Consumers are spending money for a change, though consumer confidence is still tempered with caution," Clowdis said. "I'm a big believer in watching consumer behavior. Retail is the best bellwether of what's happening in trucking." U.S. retail and food sales were up 3.2 per- cent year-over-year in December, though down 0.9 percent from November, according to the U.S. Census Bureau. Total sales reached $442.9 billion in December. Fourth-quarter retail sales were up 4.1 percent year-over- year, and 4 percent for the full year compared to 2013, the Census Bureau said in January. The consumer recovery began to catch up with the recovery in industrial activity in 2014. Excluding utilities, U.S. industrial output rose 0.7 percent in December, with manufacturing output increasing 0.3 per- cent, according to the Federal Reserve Board. For the fourth quarter as a whole, industrial production increased 5.6 percent year-over-year, it said. Lower oil and energy prices powered much of that growth, and will continue to stimulate economic activity, though low prices are also slowing U.S. energy produc- tion. "As oil prices fall, people who were financing rigs, drilling activity, start to slow down, and you get a significant reduction in industrial activity," said Don Ratajczak, consulting economist at Georgia State Uni- versity. That slowdown will be temporary, he said, and economic activity will pick up as oil prices rise toward $70 per barrel in the second half of the year. The U.S. is now the largest producer of liquid fuels, and "production is still grow- ing," Ratajczak said. "It will probably peak in the middle of the year. The (energ y companies) are still bringing in wells and By William B. Cassidy TRUCKING'S RATE MOMENTUM Solid economic growth will increase consumer demand and boost domestic rates, economists and analysts say "I'm a big believer in watching consumer behavior. Retail is the best bellwether of what's happening in trucking."

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