It's going to be a rough Thanksgiving this year, what with our nation's soldiers engaged in not one, but two low-level wars in Afghanistan and Iraq. While things are certainly easier on the home front — no one's shooting at us — that doesn't mean it's been a cakewalk for medium-duty fleet managers.
Three years of economic unrest, high fuel prices, skyrocketing insurance costs, exploding healthcare premiums, and volatile freight flows have probably made many of you reach for the heartburn medicine more than once in the past 12 months.
Although things may be looking up for 2004, there are more than a few trends taking shape that could really make our lives difficult over the long term.
First, though, the good news: the U.S. economy seems to be growing again. It jumped 3.3% in the second quarter and was on track to hit 5.2% growth in the third quarter and 4% growth in the fourth.
Freight volume — though volatile — was up 2.1% for the first eight months of the year over the same period in 2002, said Bob Costello, chief economist for the American Trucking Assns. “Between very lean inventories throughout the supply chain and improvement in new orders for manufactured goods, truck tonnage should continue to increase,”he added.
Satish Jindel, president of SJ Consulting, told me that while he doesn't think a recovery in freight volume necessarily indicates that a robust economic recovery is under way, it does mean fleets should be able to get rate increases and make them stick.
“All across the board, the market looks good for the transportation industry,”he said. “Much of that is a function of available capacity, however, which has been reduced over the last few years.”
Steve Latin-Kasper, director of market data & research for NTEA, added that there is a tremendous amount of pent up demand for replacement vehicles — especially in the medium-duty market — which is going to drive medium-duty truck and equipment sales as the economy grows. “Things are really looking up,”he told me.
Latin-Kasper noted that even OPEC's effort to cut oil production shouldn't affect the economy or the trucking industry too much. “Today, there is just too much oil being produced by non-OPEC nations for production cuts to hold very long,”he pointed out. Will OPEC's cuts cause problems? Yes. Will they have a large enough effect to derail an economic recovery? Highly unlikely.”
What does concern Latin-Kasper, though, is another terrorist attack on the scale of September 11. “That's the one wild card we really need to worry about,”he said.
Something else that clouds the future of trucking, as well as the country as a whole, is the fact that more than 2.7-million jobs have been lost in the last three years. With unemployment at 6.1%, the poverty rate in the U.S. has risen for three years running and is now 12.1%.
And although tax cuts totaling $2 trillion, combined with massive federal spending on education, defense, and homeland security, have forestalled a more serious economic decline in the U.S., they have created an even bigger problem for the future. The federal deficit is expected to top $500 billion, largely the result of continuing military operations overseas. At this rate, experts warn, the federal debt could exceed $6 trillion in 10 years. That's a very sobering fiscal pail of cold water.
So this Thanksgiving I'm going to give plenty of thanks — for things could be much, much worse — pray for the safety of our troops, that things do indeed get better, and that the solutions our nation creates to deal with our economic and security situation don't come back to haunt us in the future.