Editorial: The Economy Hits Pause
This Editorial appears in the May 25 print edition of Transport Topics. Click here to subscribe today.
Congress and the administration still are struggling to do something more than absolutely nothing on a multiyear transportation plan, so consider the nation’s economy instead.
The U.S. economy also is struggling a bit, adjusting prices and capacities as part of a process that probably will reach a conclusion well before the federal government does.
Looking at truck tonnage and new truck registrations in this issue, the economy appears to have carried over its first-quarter pause into April. The truck freight volume in April grew by just 1%, not an impressive number but better than first-quarter growth in gross domestic product of a puny 0.2%
American Trucking Associations Chief Economist Bob Costello said April tonnage was just a difficulty caused by an inventory correction. Company managers are being careful and clearing shelf space before ordering more.
Two other economists related to trucking, FTR’s Noël Perry and Arun Maha of Eaton Corp., were a bit more dismal and said separately that the economy is showing weakness. The truck-making sector, though, is doing better with growth exceeding the national average.
Even the pessimists are offering some solace in that they’re just talking about weakness, caution and concern. Predictions that the economy is past its peak and that recession is upon us are rare and ignored when they are spotted.
Turning to auto racing, Perry said he’s waving a yellow caution flag, not a red one for danger.
Trucking is doing better than many other sectors because capacity to haul freight has grown much slower than demand for the industry’s services. A stock picker of our acquaintance likes to look at carrier balance sheets and income statements.
Debt levels generally are down, and basic freight rates often are stronger because fuel prices have relaxed — so drivers are getting raises and fleets are newer, he observed.
This explains our general optimism. Trucking is connected closely to almost the entire economy. Its managers face a highly competitive market, which breeds caution, but they also have to be innovative and lunge at some well-considered risks to prosper. None of this is done without listening closely to customers.
The economy still is not at the 3% growth that used to be commonplace, but we think Perry’s yellow flag will soon be stashed away and slow, steady growth will return, especially as the national unemployment rate continues to shrink.
If federal officeholders could ever agree on a highway plan, some of these things might even happen quicker.
