Global ratings agency expects treight transports to remain healthy

New Orleans CityBusiness, Dec 6, 2005 by CityBusiness Staff Report

Following an exceptional year for the U.S. land-based freight transportation industry, global ratings agency Fitch Ratings expects a strong showing from the industry again in 2006. This year, continued demand led to significant revenue and profit increases in the freight railroad and trucking industries.

Although risks of slower U.S. economic growth in 2006 have risen due to higher energy costs, demand for the goods transported by the nation's railroads and trucks is expected to remain relatively strong next year, according to Fitch Ratings.U.S. economic growth is expected to slow somewhat in 2006, likely resulting in continued freight demand growth, but at a more moderate pace than seen in 2005. Fitch expects real gross domestic product in the United States to grow by 2.8 percent in 2006, down from a full-year forecast of 3.6 percent for 2005 and actual growth of 4.2 percent in 2004. The heavy demand for freight shipping has given railroads and truckers a level of pricing power not seen for years, according to Fitch Ratings. In 2006, pricing is expected to remain strong but, like volumes, pricing growth will begin to moderate somewhat. As fuel surcharges have factored more heavily into the pricing structure, shipping customers are paying more attention to the effect it is having on their overall shipping costs and will likely begin to more actively negotiate the surcharge along with the base rate, according to Fitch Ratings.