Ecommerce businesses drove a large demand for logistics services over the past few years. However, due to various economic forces, trucking industry stocks have tumbled 20% since September. Investors are forecasting a slowdown in business for the industry, which is worrisome because 75% of goods shipped in Colorado are transported by truck. The slowdown in demand may have a negative effect on jobs, which could worsen pressure local businesses already feel from international trade tariffs.
Trucking’s close ties to local businesses
Less trucks on the road could also mean less demand for insurance products. The insurance industry is well represented in Eagle County and a slump in the trucking industry could threaten jobs in this sector of the economy. Although purchasing insurance is facilitated by online resources, the insurance sector still employed 2.66 million people in 2017. While not all employees are at risk of losing their jobs, the loss of a large portion of consumers’ positive contributions further threatens an already uncertain economic future.
In addition, trucking has close ties to the retail sector. Retail businesses in Vail Valley depend on logistics services to store, ship and receive merchandise. Local business owners fear prices for goods imported from China could rise because of tariff hikes. In a recent Tweet, President Trump claimed the tariffs have hindered the growth of the Chinese economy. The President predicts the Chinese government will want to renegotiate trade deals in order to reverse the effects on its economy. Meanwhile, winter sports equipment manufacturers and retailers brace for future financial woes, which could result in even less need for trucking services.
Retail is not the only sector that could reduce its demand for logistics. A negative trend in local employment could mean Eagle County restaurants will be frequented less by locals, causing restaurants to reduce their need for shipping. A dip in visitors would also affect hotels, resorts and entertainment businesses. This would weaken further demand for trucking.
Social programs could suffer repercussions of a weakened trucking industry
Driver shortages have helped place the trucking industry in an advantageous position, allowing companies to charge more for their services. But the tendency for companies to raise prices could come to an end and this can be indicative of a shift in the overall economy. The industry pays over $40 billion in federal highway user taxes. If the trucking industry does indeed take a nosedive, the federal government could possibly miss out on enormous sums of money in taxes. This could have ramifications on social programs such as welfare and housing.
The American Trucking Association considers trucking the lifeblood of America. Taking into account the taxes contributed and the long reaching effects of a slowing trucking industry, it is safe to say they are correct. In the meantime, investors will keep a close eye on trucking stocks knowing the industry is a vital sign for the rest of the economy.