A strong performance by the European economy resulted in impressive growth in the road freight sector in 2017, according to Ti
Ti’s latest report, European Road Freight Transport shows that the growth rate of 4.5% was its fastest in real terms since at least 2009. What is more, the momentum carried on into 2018 with a growth rate of 5.8% expected for the full year and volumes set to increase by 3.5%. Both the domestic and international road freight sectors benefited from the robust economic conditions powered, in particular, by manufacturing production.
However, there are clouds on the horizon. Prices have increased at a faster rate in the road freight market than in previous years. After global oil prices recovered from their slump in 2015/16, average diesel prices increased by approximately 9.0% in 2017 and were up 6.4% in the first six months of 2018. Tightening labour markets and capacity, increasing tolls and moderate, yet sustained inflationary pressures are also contributing to an increase in road freight rates.
Looking ahead, the recent rate of growth is unlikely to be replicated and Ti forecasts a real compound annual growth rate of just 2.7% between 2017 and 2022. There are many downside risks to the European economy such as debt levels, unemployment, protectionism and the removal of monetary stimulus. Increasing price inflation driven by diesel prices, labour costs, tolls and vignettes could also suppress demand or force shippers to look at other alternatives such as short sea shipping or rail.
According to the report’s author, Viki Keckarovska,
"Driver shortages, Brexit, fuel costs, e-commerce logistics requirements and increasing competition from start-ups are key factors in the current risk landscape. Despite the present strength of the market, there are many short and medium term challenges to be navigated by road freight operators."