Industry Outlook
2007
By: David Bradley, President, Ontario Trucking
Association
(Toronto: Nov. 15, 2007) -- Perhaps the record crowds
at the OTA convention are a harbinger of stronger times ahead for the Ontario
trucking industry, but the economic signals seem to be pointing to another year
of unspectacular growth in 2007, but growth all the same. The economist in me
says that modest, sustainable growth is better than wide, boom-bust swings in
the business cycle anyway. However, in an industry whose growth has outpaced
that of the economy virtually every year since World War II, it is hard to
accept sluggishness. This is especially true when only a few short years ago,
the industry was experiencing – for the first time in decades – a
capacity crunch which in turn provided the impetus for concerted efforts to
improve the rate structure.
In recent months, someone complained to me that the
economy is simply not generating enough freight. In my view, the economy is
churning out precisely the right amount of freight given current levels of
aggregate demand. The problem is, and this has been a chronic industry issue,
there are perhaps too many trucks chasing that freight.
This is particularly true in certain sectors which are
more susceptible to exchange rate fluctuations or changes in consumer buying
patterns, etc. As always, a lot will depend on what business a trucking company
is in. Ontario’s construction sector, for example, is still quite strong.
The problems in industries like automotive manufacturing, pulp and paper, etc.,
are well documented. It’s not surprising then that bulk haulers are in
general busier than van operations, which tend to be more susceptible to
capacity swings.
While the consensus view amongst most economists is
that 2007 will see more modest growth, there is one more wild card to add to the
usual suspects (the value of the Canadian dollar and fuel prices) – that
is the prospects for the US economy. Over the past couple of years, the industry
has already had to adjust to shifting traffic patterns, where shipments from the
US in many cases displaced exports to the US as the headhaul. Canada’s
trade surplus with the US has shrunk significantly. Yet Ontario’s economic
prosperity is still overwhelmingly dependent upon exports to the US (which
reflect about 40% of the provincial GDP).
At the time of writing the US economy is slowing. The
housing market which was rife with speculation is crashing. The US
government’s fiscal imbalance is soaring into the stratosphere. Consumers
are in debt up to their eyeballs. However, one thing that history gas shown us
is never to count out the US economy. This bears watching.
There will also be plenty of new regulations for the
industry to adjust to in 2007 – e.g., hours of service, pre-trip
inspections, and engine emissions standards. Ontario will introduce a new CVOR
and facility audit protocol. The speed limiter issue should be dealt with. The
report of the bi-national commission that has been studying where to locate a
second border crossing at Windsor-Detroit will be issued. But, will the senior
levels of government have the political will to actually implement the
report’s recommendation?
Speaking of politics, a provincial election will take
place in Ontario on October 4th. And, the minority situation in Ottawa virtually
guarantees that we will have to endure another federal election in 2007.
It’s always harder to get things done when governments are in pre-election
mode. That is not always a bad thing, but there is so much that still needs to
be done both in transportation and elsewhere. Ontario must to grips with the
competitiveness challenges faced by domestic businesses. It needs a long-term
plan for major highway infrastructure investment. It needs to tackle some
important but very political issues like harmonizing the PST (and the MJVT) with
the GST, so business inputs and investment are not taxed. There are still a host
of issues at the border to be dealt with and perhaps new security programs to be
introduced that we are not yet aware of.
It could be a rough ride at times next year, but I
remain on balance optimistic. Despite its problems, the economy has shown more
resiliency than perhaps we anticipated. Capacity will continue to be an issue
and trucking will continue to be the preferred and predominant choice of
shippers. As always the trucking industry will rise to whatever challenges are
thrown its way.
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The Ontario Trucking Association (OTA) is a business
association representing motor carriers operating into, out of and within
Ontario. The trucking industry is one of Ontario’s largest employers.
Trucks haul 90% of all consumer products and foodstuffs produced and consumed in
the province and 80% of Ontario’s trade with the United States. Founded in
1926, the association’s membership comprises trucking companies of all
sizes, shipping all types of commodities, from all regions of North America. OTA
is a member of the Canadian Trucking Alliance. The Globe & Mail has stated
that “OTA and CTA have been among the most successful lobbyists in the
land.”
© 1995 -
2008, Ontario Trucking Association
555 Dixon Road, Toronto, Ontario
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Tel: (416) 249-7401 | Fax: (416) 245-6152
Email:
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