It’s been an interesting – indeed, almost TOO interesting – week so far in terms of economic data.
For starters, the U.S. economy apparently contracted by 0.1% in the fourth quarter last year, according to data compiled by the U.S. Bureau of Economic Analysis, after growing by 3.1% in the third quarter.
THAT news caught a lot of folks off guard, for while most has predicted slow growth in gross domestic product (GDP) for the final few months of 2012 – from 1.1% to 1.5% on average – no one expected negative numbers, no matter how small, to make an unwanted appearance.
In fact, this is the first contraction by the U.S. economy since the dark days of the “Great Recession” back in 2009; certainly not a comparison anyone hoped to draw this early into 2013.
It didn’t help that the Conference Board piled on with the latest reading of its Consumer Confidence Index (CCI), which nosedived in January after declining in December.
The CCI, based on a probability-design random sample conducted for the group by Nielsen, now stands at 58.6, down from 66.7 in December, with those consumers claiming business conditions are "good" declining to 16.7% from 17.2%, while those stating business conditions are "bad" increasing to 27.4% from 26.3%.
Things looked no better to consumers for the next several months either, the Conference Board reported, with those expecting business conditions to improve over the next six months declining to 15.4% from 18.1% – though those expecting business conditions to worsen declined slightly to 20.6% percent from 21.1%.
Lynn Franco (at left), director of economic indicators at the Conference Board, added further gloom to the mix by noting that that the back-to-back drops in the CCI in January and December erased all of the gains made through 2012.
“Consumers are more pessimistic about the economic outlook and, in particular, their financial situation,” she noted. “The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock."
None of that bodes well for truckers of any stripe – freight hauler, dump truck operator, etc. – because if GDP is shrinking and consumer confidence is plummeting chances are good that business activity of all types is going to fall, thus blowing a hole in potential revenues and profits for commercial vehicle operators.
Yet are things truly turning for the worse? Well, as I noted in this space last week, some seriously mixed signals are emanating from a variety of corners concerning the economic road ahead – with more than a few offering some fairly positive portents.
First, let’s return to the BEA’s report concerning the downturn in real GDP in the fourth quarter last year – a downturn primarily due to reductions in private inventory investment, in federal government spending, state and local government spending, plus exports.
Yet it should be noted that this is but the BEA’s “first” stab at analyzing all of the GDP data it receives – for the agency goes back and “corrects” the numbers in February and then again in March. So the final tale of U.S. GDP growth for the fourth quarter of 2012 has, in many ways, yet to be told.
"You got a combination of inventories and defense [cuts] which are taking more than 2 percentage points off the growth rate," Nigel Gault (at right), chief U.S. economist at global forecasting firm IHS Global Insight, told Reuters. "This is not an indicator of recession."
Indeed, the most recent ADP National Employment Report noted that 192,000 jobs were created in January – which follows the creation of 215,000 jobs in December and 118,000 in November. That’s definitely not recessionary.
In fact, though the manufacturing sector shed 3,000 jobs in January, many manufacturing CEOS polled by PricewaterhouseCoopers (PwC) in its Q4 2012 Manufacturing Barometer indicated that are not only more optimistic about potential U.S. economic growth in the months ahead, they also plan on hiring more workers as well.
Reflecting the increased level of optimism, 83% of 60 senior executives polled by PwC are forecasting revenue growth for their companies over the next 12 months, while only 3% expect negative results, with 48% of them expressing optimism about the 12-month outlook for the U.S. economy, up 11 points from the third quarter, while only 7% were pessimistic.
Along with greater optimism, indications regarding new hiring increased to 58%, up 21 points from the same quarter in 2011.
"Overall sentiment among U.S. industrial manufacturers regarding the prospects for the domestic economy rose in the fourth quarter along with company growth projections, which trended higher as well," explained Bobby Bono (at left), U.S. industrial manufacturing leader for PwC.
"The improved sentiment regarding the domestic outlook contrasts with the continued high level of uncertainty concerning the international stage,” he added. “This dichotomy [Impertinent editorial note: See? I am not the only one to use this word!] appears to be playing out in the healthy indications for net new hiring and operational investment, which contrast with the pullback in plans for international expansion. Management teams are placing their bets on the U.S. economy as they seek avenues to strengthen their competitive positions and foster growth."
Thus, in many ways, we remain at an inflection point where the U.S. economy is concerned – will the days ahead be full of growth and jobs … or not? It’s still a tale in flux at the moment.