Canada is one of today’s top nations in terms of economic growth. This national economic expansion didn’t just make the country’s businesses boom, but it also helps its number one trading partner – the United States.
The truth is that the economic expansion in Canada also has a huge impact to the growth of the United States. The increasing demand for U.S. goods in Canada makes U.S produce and ship more products to Canada. This shows a positive sign that the trade and commerce of both countries are moving in the right direction. However, despite the positive impact, a problem arises – freight demand increase.
Why economy is affecting freight demand?
Cargo demand is primarily influenced by the quantity of goods produced and consumed – the economy. As the expansion of an economy continues, the overall demand for products and services also rises. This is because the purchasing power of the population increases resulting in increased demand of goods and services. Such condition is what is happening in Canada.
Since the U.S. is the number one trading partner of Canada it has become a top supplier of products and some services for Canadians. This leads to a demand for more trucking and shipping services. But it’s not that simple as what others may expect. Because as the demand keeps growing, the freight costs increase.
Freight cost increased in Canada
The Freight Carriers Association of Canada (FCA) and the North American Transportation Council (NATC) have revealed updates reflecting the market conditions and cost increase in both Canada and the U.S. The impact of this update for FCA Canadian Domestic rates and for NATC Cross Border rates is approximately 4.8%. Furthermore, the Canadian General Freight Index (CGFI) has published results, showing the overall cost of ground transportation for Canadian shippers. The results have shown an increased by 2.4 % in January 2015 when compared with December data. The Base Rate Index, which excludes the impact of Accessorial Charges assessed by carriers, augmented by 2.8 % when compared to December 2014.
Other Factors Affecting Freight Demand
Technological Advances
There are some significant technological advances in equipment and information systems over the past three decades that have had a huge impact on cargo transportation. These advances include automation and robotics, automated terminals, containerization, double-stack technology handling, and conveyance design. On the other hand, advances in information systems include automated equipment identification (AEI), applications of Intelligent Transportation Systems (ITS) to commercial vehicle operations and electronic data interchange (EDI).
Globalization of Business
As factories, warehouses, and some production facilities are being shifted to different areas around the globe where goods can be produced more economically, the demand for world trade changes. The methods of domestic and foreign production and distribution vary significantly by industry and product type. Thus, affecting transportation requirements.
While the overall trend is positive it will be interesting to see where Canada’s transportation industry adjusts next.