Improving economy leading freight recovery: Analyst

TORONTO — Trucking activity has always been one of the most accurate barometers for economic performance, but the reverse can also be true.

Early stages of economic recovery in Canada signify better times ahead for Canadian carriers, says National Bank Financial analyst Aaron Duxbury, who gave trucking stocks an upgrade last week. 

Specifically, Duxbury raised his rating on truckload giant Transforce Inc. to "outperform."

According to a Globe & Mail report, Duxbury warns that the industry is still overcoming soft pricing and low volumes, but even a modest recovery in the latter half of 2009 will bode well for carriers.

Truck freight normally recovers ahead of the broader economy. However, Duxbury said “stubbornly” high inventories will keep that from happening this time.

"We do not expect truck volume to lead the economy this time," he said. "In particular, while absolute inventories have fallen, sales have fallen much faster, sending the inventory-to-sales ratio to levels not seen since the early-90s."

He said the recent shrinking of supply — via bankruptcies and lack of equipment purchases — have helped temper the excess capacity seen in the industry over the last three years.

Duxbury says that right now trucking has about 15 percent more capacity than the market demands.