If you see prices creeping higher for everything from cereal to socks in the next few months, you can probably blame this stark reality: There aren’t enough truck drivers delivering the goods to stores.
A severe shortage of truckers is pushing up freight costs and, in turn, nudging up retail prices. And it’s occasionally leading to late deliveries that leave store shelves empty. Self-driving trucks eventually may provide some relief, but driver shortfalls are expected to only get worse over the next few years.
The crunch also is affecting corporate profits and the stock market as higher transportation costs ding company earnings now being reported. It occasionally has forced manufacturers to shut down production if they don't receive raw materials in time.
The driver shortage has been going on for years, with Baby Boomers retiring and few Millennials willing to endure hardships such as being away from home for weeks at a time on cross-country deliveries. But it has taken a bigger toll the past year as the economy has strengthened, increasing demand for items ranging from oil and housing supplies to clothing and consumer electronics. Fast-growing e-commerce shipments, particularly from Amazon, add to the congestion. And it’s likely to intensify in coming months as the holiday season draws closer, analysts say, with deliveries arriving as early as late spring.
Compounding the squeeze: On April 1, industry safety officials began enforcing a requirement for all trucks to be equipped with electronic devices to ensure drivers comply with limits on how long they can drive without a break. That’s reducing the number of trucks available at any given time and causing some drivers to leave the business, crimping capacity over the longer term, says Ben Cubitt, senior vice president of Transplace, a freight management firm that helps companies cut costs and improve service.
There’s a shortage of 51,000 truck drivers nationwide, the ATA says, up from 20,000 in 2013 and 36,500 in 2016. The ATA projects the driver gap will increase to nearly 100,000 by 2021. Meanwhile, the economy grew at more than a 3% annual pace during the last nine months of 2017, up from an average 2.2% since the Great Recession ended in 2009.
The increases are likely to be small, perhaps a few cents for a typical weekly grocery bill, says Joe Glauber, chief economist at the International Food Policy Research Institute. Shipping costs make up 3.6% of consumer food prices and 6% of overall retail prices, Glauber and Cubitt say. But retail prices are expected to increase further as the driver shortage intensifies.
Several grocery store chains, including Kroger, Publix and Supervalu, did not return messages asking whether they planned to raise retail prices in response to the higher shipping costs.
General Mills, maker of Cheerios and Yoplait yogurt, is now forced to tap that pricier spot market for 20% of its shipments, versus its normal 5%. “The spot market prices can be 30% to 60% higher than our contracted rates,” CEO Jeff Harmening told analysts last month. He largely blamed the higher freight costs for a third-quarter operating profit “that fell well short of our expectations.”
So far, most producers have absorbed the added costs, but that’s changing as they realize the price increases aren’t temporary, Cubitt says.