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The dramatic drawdown of inventories, at least in manufacturing, has to hit bottom at some point — and that’s a good thing, Stifel Nicolaus & Co. Inc. analyst John Larkin recently told attendees of the Truckload Carriers Association annual conference in Orlando, Fla.

Larkin delivered his presentation — titled “Freight Recession Morphs Into Depression: A Current Overview and Future Outlook for the Trucking Industry” — on March 10. He released it yesterday in a research note.

The trucking and railroad industries have been experiencing 15 percent and 20 percent volume declines the past few months, but those precipitous dips aren’t likely to continue over the longer term, Larkin said.

“There is a limit to how far inventories can be de-stocked,” he added.

The only caveat? If the gross domestic product declines “more dramatically” than Stifel Nicolaus execs expect — if it does, “we likely have much more severe problems,” Larkin said.

Ultimately, the transportation industry may be impacted most by shippers making modal shifts, typically sacrificing service for lower cost, Larkin said. Shipments that went by air now are going by ocean and ground; less-than-truckload (LTL) shipments are shifting to truckload; truckload shipments are moving via intermodal; intermodal shipments are being moved as carload shipments; and carload shipments are shifting to barge.

“Whether or not that trend will reverse itself when the economy recovers still remains to be seen,” he said. “But, as all of these modes increase their service levels, we think people are reevaluating whether or not they are paying too much for too high a service, a service that is actually of higher quality then they need.”

In a separate note, Stifel Nicolaus analyst David Ross said first-quarter LTL tonnage should post more significant year-over-year declines than fourth-quarter 2008’s totals, given a “very challenging environment with seasonally soft volumes.” He expects year-over-year volume declines in the second and third quarters, as well, with the fourth quarter representing the best possibility for year-over-year volume increases “as we begin to lap the freezing of the credit markets in the fall.” Ross also projects LTL volumes to rise “only modestly” — about 1 percent — in 2010.

— Desiree J. Hanford. A Chicago-based free-lance writer, Hanford covered the equities market, including transportation, for Dow Jones & Co. for 10 years.