Friday, April 26, 2013

Will freight rates rise with new HOS rules starting in July?

I have recently read a few articles about this and they all basically came to the same conclusion.  Here is a link to one of them that I thought was interesting.

Right now our economy is not very strong.  That is very evident in the amount of freight that is moved from point A to point B.  This in itself is a very good barometer of where the economy is.

You have to look at the different types of freight being moved to get a good picture and right now we are just barely moving along.  The economy is not as robust as it needs to be which brings us to a new situation.

Most analysts believe that once the new HOS (hours of service) rules go into effect on July 1, 2013 that it will quite possibly have a very detrimental effect on the economy.  Why do you ask?  It's simple mathematics really.

Right now you have a set number of trucks, or power units that are able to service the transportation sector.  We are not seeing a large increase in fleets at this time to add to this simply because there is not enough freight to justify it nor are there any massive new drivers to operate the trucks.  When the new rules go into effect it could affect productivity by at least 5% which was a number given in this article.  The FMCSA estimated it to be 1.5%. There are other analysts that are predicting productivity to drop in the mid to upper single digits.

So what does this mean?  Simple, it means with fewer trucks able to haul available freight, the rates for that freight will have to increase to get the freight moved.  What will this do to the economy?  It will be a hit, since I know as a business owner I won't be eating the cost, and that cost will be passed on to the consumer.  When it is passed to the consumer, they have less money to spend, which will slow down this sputtering economy.

So are these rules going into effect at a bad time?  Yes they are.  Should they delay it?  I would think so but remember we are talking about the Federal government.

Will I take a higher rate?  Of course!  My productivity will be dropping so I have to make the revenue up in some way shape or form.

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