Analysts See No Evidence of Looming Recession

From left, ACT's Meil, VP Steve Tam, Kahan by Jonathan S. Reiskin/Transport Topics

COLUMBUS, Ind. — The well-established, yet not-at-all-dramatic U.S. economic recovery will probably avoid recession and instead keep chugging along at about 2% annual growth, said a trio of economic analysts.

Despite a sluggish fourth quarter to end 2015 and a stock market tumble to start this year, two economists and a stock analyst said the United States is solid although not robust, and there is no obvious catastrophe lurking to send the country reeling into economic decline.

Economist Jim Meil compared the business cycle to the four seasons of a year and said the current U.S. recovery is probably in its “autumn.”

“The characteristics of the late cycle are at work now,” Meil said here March 30 at the ACT Research Co. seminar. Autumns feature tight credit, earnings under pressure, fat inventories and moderate growth.

Automobiles and construction other than oil and gas exploration are doing well now, Meil said, and those sectors usually provide a lot of truck freight. A problem with late cycle economies, though, is that most durable goods manufacturers are especially sensitive to changes in gross domestic product.

“They’re very, very sensitive,” he said.

U.S. GDP grew by just 1.4% a year during the fourth quarter, but by 2.4% for all of 2015, the Commerce Department reported.

Sam Kahan, ACT’s chief economist, predicts 2% growth this year for U.S. GDP, and said growth through 2020 should average about 2.4% a year.

Retired from the Federal Reserve’s Chicago Regional Bank, Kahan said he expects the Fed to raise interest rates two more times this year, probably by a quarter percentage point each time.

Investors are worried but the economy isn’t plummeting, said a stock analyst.

“Currently we’re seeing a ‘sentiment scare’ and a profits recession. People are nervous on the dollar,” said Jeff Kauffman, who follows transportation carriers for the Buckingham Research Group.

The Standard & Poor’s 500 index plunged 12% in 44 days to 1,829 to start the year. After Feb. 11 it started climbing again.

Looking at domestic railroad shipping, Kauffman said intermodal freight, chemicals, automobiles and certain types of construction are all strong.

“This is not the stuff of a recession,” he said, while also observing that recent flooding in Texas and Louisiana hurt the rails and coal shipping is poor.