Editorial: Economy in Transition?

Suddenly it’s cold and unpleasant and, no, it’s not really the weather. It’s the business climate. The steady, if unspectacular, growth we’ve gotten used to since 2010 has turned flat, or so it seems of late.

There’s no deep, sudden collapse, as there was in the second half of 2008. The earnings reports in this issue show freight transportation companies that are generally profitable, just not by as much as during last year’s third quarter.

Considering some of the big indicators, it’s not too surprising. The U.S. Department of Commerce said third-quarter gross domestic product grew at a 1.5% annual pace, down from 3.9% a year during the second quarter.

Manufacturers — some of trucking’s best customers — are having a tough time now because exports are so difficult. The strong U.S. dollar makes our goods relatively expensive, and the troubled economies of other nations have cut their demand for our production.

The big question, then, is, are we looking at a three- to six-month rough patch, or is this the beginning of a serious, lengthy weakening in economic activity?

Based largely on what was said by industry executives and analysts at American Trucking Associations’ recent Management Conference & Exhibition, we’re leaning toward calling this a bad cold, rather than pneumonia.

Inventories are high but not dangerously so. Once that is worked off, said ATA Chief Economist Bob Costello, the nation will return to a growth rate of about 2.5% a year or a little better.

The four big, heavy-duty truck-making corporations working in North America are united in their forecasts that 2016 should be a very good year for Class 8 sales.

But UPS Inc. said the manufacturing economy hindered its third-quarter results, though it was optimistic about the year’s final three months when strong domestic consumer spending dominates due to the holidays.

Truckload and less-than-truckload carriers often said revenue declines were related to low fuel prices. Fuel surcharges did not draw in as much revenue as they did a year ago.

If revenue is going to drop, that’s the way to do it, by having to spend less on fuel. For some, there was a happy side effect of being able to boost basic freight rates as surcharges waned, although this is not happening as rapidly as before.

Don’t order the most expensive car you’ve ever wanted to own now, but don’t panic either. Pay attention and stay sharp.